Bill No. 1,847/2024 Allows Real Estate Cost Updates and Reopens the RERCT Enrollment Period

Originally published on September 4, 2024

On 08/20/2024, the Federal Senate approved Bill No. 1,847/2024. Notwithstanding the relevance of the topics addressed in the text, such as the establishment of a transition regime for the substitute contribution and for the additional Cofins-Import (measures that make up the so-called "payroll tax relief"), this article focuses specifically on two other key points of the Bill: (i) the possibility of updating the value of real estate held by individuals and legal entities; and (ii) the reopening of the enrollment period for the regularization program for undeclared assets, the General RERCT (Special Regime for Currency and Tax Regularization).

Taxpayers who opt to update the acquisition cost of their real estate will be able to pay tax on the difference between that cost and the market value at a final rate of 4%.

The mechanism is similar to the "Abex", introduced with the publication of Law No. 14,754/2023, which established new rules for the taxation of assets and rights held abroad. This tool seeks to give individuals and legal entities an opportunity to mitigate the tax burden that will apply in the future to the transfer of their real estate, by reducing the taxable capital gain at the time of sale.

In addition, the Bill also reopens the enrollment period for the RERCT, a program for the regularization of undeclared assets and rights through the payment of the taxes due and a previously established penalty.

The enrollment period for the new General RERCT will be 90 days from the publication of the law. To benefit from the program, taxpayers must declare their asset position as of 12/31/2023 and pay the taxes due and the applicable penalty.

The General RERCT applies to all funds, assets or rights of lawful origin, held in Brazil or abroad, that have not been declared or have been declared incompletely or incorrectly. Eligible items include, for example: (i) bank deposits, investment fund units and financial instruments; (ii) loan transactions with individuals or legal entities; (iii) intangible assets of any kind available in Brazil or abroad; (iv) real estate in general or assets representing rights over real estate; and (v) vehicles, aircraft, vessels and other movable assets subject to registration in general.

The amount of the assets being regularized will be considered a net worth increase acquired on 12/31/2023, and the individual or legal entity must pay income tax on it, as capital gain, at a rate of 15%.

Finally, taxpayers who choose to enroll in the General RERCT must identify the origin of the assets and declare that they come from a lawful source, with no requirement to provide proof. If the self-declaration is challenged, the burden of proving that the taxpayer's declaration is false will fall on the Federal Revenue Service (RFB).

The Bill is currently under review by the Chamber of Deputies and, if approved, will then be sent for presidential sanction. Due to the legislative process, the text may still undergo significant changes.

Lorusso & Partners continues to closely monitor all updates on this matter and remains at your disposal to clarify any relevant questions.