Tax Reform and leases: Deadline for adhering to reduced tax rates expires on December 31

Supplementary Law No. 214, dated January 16, 2025, established a special transitional regime applicable to lease, onerous assignment, and lease-purchase agreements.

Under this regime, companies can choose to tax the gross revenue from rentals at the reduced rate of 3.65%, provided that the non-residential lease agreements:

• have been entered into for a fixed term and until January 16, 2025; and
• have been duly registered with the competent Real Estate Registry Office, the Registry of Deeds and Documents, or made available to the Brazilian Federal Revenue Service and the IBS Management Committee by December 31, 2025.

This alternative tends to be economically advantageous since the current general rate is approximately 8%, even though opting for the regime results in the impossibility of using Goods and Services Tax (IBS) and Social Contribution on Goods and Services (CBS) credits related to property expenses, such as maintenance, renovations, or insurance.

In the case of non-residential contracts, the December 31, 2025 deadline is considered final. In other words, without registration by that date, the contract cannot be linked to the 3.65% regime in the future.

From a real estate perspective, it is useful to analyze the possibility of registering the contract, also considering that a contract registered with the competent Real Estate Registry guarantees the tenant the maintenance of the lease in case of sale of the properties to third parties and the right of first refusal in the acquisition of the property.

Demarest’s Real Estate and Tax teams are available to provide any further clarifications.