When selling a property, attention must be paid to capital gains.

According to Article 25, Paragraph 1, of Law No. 9.430/96, the gain on the sale of investments, fixed assets, and intangibles corresponds to the positive difference between the selling price and the respective book value, in other words, the positive difference between the sales value and the purchase cost.

However, the taxation of capital gains may vary depending on the adopted accounting regime (Simples Nacional, Presumed Profit, or Actual Profit) as well as the activity carried out by the legal entity.

In the case of companies classified under the Presumed Profit regime, establishes that the income tax base will be determined by applying a percentage to the gross revenue earned, which is then added to the capital gains and other non-operational results, and the income tax rate is applied to this total. Therefore, in principle, capital gains are not included in the gross revenue for the application of the presumption percentage.

However, for companies engaged in real estate activities that use their own immovable property for leasing and selling, there were doubts about whether the sale of properties in their operations would generate capital gains or be classified as gross revenue for the purposes of determining presumed profit.

In this regard, the Brazilian Federal Revenue Service (“RFB”) expressed its opinion through Inquiry Proceeding COSIT No. 07/2021 that taxation should consider the corporate purpose of the legal entity and the purpose of the property, regardless of its accounting classification.

Although the Inquiry Proceeding is binding only on the taxpayer who made the inquiry, it should also be observed by tax authorities, as it reflects the RFB’s understanding on the specific matter and provides support to all taxpayers.

The Tax Law team at Nasser Advogados is available to provide further clarification.