The New Taxation on Property Leasing and Sales by Individuals: Challenges and Strategies After the Tax Reform

1. A New Chapter in Real Estate Taxation

The 2025 tax reform, implemented by Complementary Law No. 214, redesigned the foundations of taxation on goods and services in Brazil. Among its many changes, one of the most significant impacts falls on real estate leasing and sales transactions carried out by individuals — which, under certain circumstances, are now subject to the Goods and Services Tax (IBS) and the Goods and Services Contribution (CBS).

Traditionally, property rental and sale operations were outside the scope of consumption taxes. The ISS (Service Tax) did not apply to rentals, and property sales were taxed only by the ITBI (Tax on the Transfer of Real Estate), when involving an onerous transfer of ownership. Under the new dual VAT model (IBS + CBS), the legislation expanded the scope of taxation to include operations involving both tangible goods and rights — expressly encompassing real estate activities carried out on a regular basis.

This change directly affects investors, entrepreneurs, and asset managers, who will need to reassess their structures and strategies in the real estate market to avoid fiscal surprises and optimize their tax burden.

2. When an Individual Becomes a Taxpayer of IBS and CBS

Complementary Law No. 214/2025 establishes objective criteria to determine when an individual is considered a regular taxpayer of these new taxes. In general terms, the classification depends on the scale and frequency of operations, taking into account both the revenue generated and the number of properties involved.

Property Leasing

An individual who earns more than R$ 240,000 annually in rental income and rents out more than three properties simultaneously will be considered a taxpayer of the goods and services taxes. Both criteria must be met for the obligation to arise.

The R$ 240,000 limit — equivalent to an average of R$ 20,000 per month — will be adjusted monthly according to the IPCA inflation index, as expressly provided by the law. This automatic update shows the legislator’s intent to keep the threshold aligned with inflation and market conditions.

In practical terms, this new classification means that leasing, once regarded merely as a form of passive income, will now be viewed as an economic activity when carried out on a relevant or systematic scale.

Property Sales

For property sales, the law defines that an individual who sells more than three properties in the same year becomes a taxpayer of IBS and CBS, regardless of the value involved.

However, there is an important temporal limitation: only properties acquired less than five years prior will be counted. The intent is to distinguish occasional sales — typically related to asset reorganization — from resale or development activities that demonstrate a business character.

In the case of properties built by the owner, the rule is even stricter: if the individual builds and sells more than one property within five years, they will also be subject to taxation. The rationale is that such activity constitutes productive enterprise rather than mere asset management.

3. Transactions Within the Same Year and the Notion of Regular Activity

Beyond historical analysis, the legislation also considers the current year’s activities.That is, if during the year rental income exceeds R$ 288,000 — 20% above the reference limit — the individual is automatically classified as a taxpayer, even if fewer than three properties are rented out.

Similarly, selling more than three properties in the same year, or selling more than one self-built property, is enough to trigger taxation.

This approach reinforces the principle that the key criterion is not only financial volume but also regularity and the economic nature of the operation. The reform thus aligns individual real estate taxation more closely with the corporate model applied to legal entities.

4. Short-Term Rentals and the Equivalence to the Hospitality Sector

One of the most sensitive aspects of the new legislation is the equivalence of short-term rentals — those lasting up to 90 days — to hotel services.

According to Complementary Law No. 214, the temporary rental of residential properties will be treated the same as lodging services, subjecting the individual landlord to IBS and CBS regardless of the number of properties or the amount earned.

This rule directly affects property owners who use digital lodging platforms such as Airbnb and similar services, consolidating the trend toward formalization and taxation of the sharing economy. Frequent short-term rentals will now receive tax treatment similar to that of businesses in the tourism and hospitality industries.

5. Economic Impacts and Asset Management Strategies

The changes introduced by the tax reform require individuals to adopt new ways of organizing and managing their real estate assets. The impact is not only fiscal but also strategic and operational.

Entrepreneurs and investors must evaluate whether keeping properties under personal ownership remains the most advantageous option, or whether it is time to establish a holding company.

Creating a legal entity specifically for managing real estate operations can offer benefits such as:

·       Better accounting and fiscal control of revenues and expenses;

·       The ability to use IBS and CBS credits on acquisitions and related services;

·       Easier estate and asset management, reducing future risks and bureaucracy.

However, this decision must be preceded by detailed legal and tax planning, considering the nature of each transaction, the number of properties involved, and the investor’s goals.

Moreover, maintaining organized and up-to-date records becomes essential — both to prove the source and nature of income and to demonstrate that activities remain within the non-taxable limits of IBS and CBS.

Poor documentation may lead to audits and penalties, especially as Brazil’s Federal Revenue Service is expected to intensify the cross-referencing of financial and property data.

6. The Role of Preventive Legal Counsel

In an increasingly complex context, the support of specialized professionals is essential. Preventive legal counsel allows for the prior assessment of each transaction’s tax classification and helps identify legal opportunities for tax optimization.

Close collaboration with tax attorneys and accountants also helps avoid improper classifications that could result in audits, fines, or future restrictions.

Preventive legal action, therefore, should be understood not merely as protection but as a component of strategic wealth management — particularly for entrepreneurs and families with diversified real estate portfolios.

7. Final Considerations

Including real estate operations within the scope of IBS and CBS represents a new regulatory milestone for the sector. The figure of the individual investor, previously distant from the tax obligations typical of companies, is now viewed through a business lens, with the duties of an active taxpayer.

Understanding the new rules, classification limits, and planning opportunities is not just a matter of legal compliance but of financial intelligence.

The future of real estate asset management in Brazil will increasingly depend on technical and strategic expertise. Those who adopt a proactive approach, with continuous legal and tax planning, will be best positioned to navigate this new environment with security, predictability, and long-term sustainability.