Taxation of the Disposal of Reclassified Real Estate under the Deemed Profit Regime: An Analysis of COSIT Ruling No. 95/2026
Originally published on the 2nd day of July, 2026
On June 24, 2026, the Brazilian Tax Authority (Receita Federal) published COSIT Advance Tax Ruling No. 95 (Solução de Consulta Cosit nº 95). Through this ruling, the tax authorities reaffirmed their position that income derived from the sale of real estate originally classified as non-current fixed assets of a company must be taxed under the capital gains regime (GCAP), even if such assets were later reclassified as current assets due to a change in the company's corporate purpose.
In the case analyzed, the requesting company (which had opted for the deemed profit regime – lucro presumido) initially operated in the industrial and commercial timber sector. To carry out these activities, it had incorporated a series of real estate properties (e.g., warehouses, storage facilities, and the company's own headquarters) into its fixed assets. Subsequently, its corporate purpose was expanded to also include the leasing of its own properties and the purchase and sale of real estate. This change was accompanied by the corresponding accounting reclassification of the properties, which were transferred from fixed assets (non-current) to inventory (current assets).
Given this scenario, the requesting company asked whether income from the disposal of these properties—reclassified due to the change in business activity—should be treated as "Gross Revenue" (subject to the CSLL and IRPJ tax base after application of the deemed profit percentages) or as "Other Revenue," in the form of capital gains (subject to the CSLL and IRPJ tax base without application of the deemed profit percentages).
According to the tax authorities, the original purpose assigned to the property must prevail for tax purposes, regardless of the change in the company's corporate purpose and the resulting accounting reclassification. Since the requesting company's properties were acquired primarily for use in its operational activities (rather than for resale, for example), the income arising from their disposal must be subject to capital gains assessment.
Theoretical Basis: Determining Gross Revenue Based on Accounting Criteria
Under current tax legislation, deemed profit is calculated by applying deemed profit percentages to the company's gross revenue. Gross revenue, in turn, comprises amounts arising from the company's main business activity. On the balance sheet, assets intended for short-term trading (up to 12 months)—and therefore directly associated with the company's typical business activity—are recorded as current assets. On the other hand, assets realizable in the long term (at least 12 months), since they are not directly linked to the company's typical business activity, are recorded as non-current assets.
These premises lead to the following logical conclusions: (i) amounts arising from the trading of items recorded as current assets, since they reflect the company's main corporate purpose, are part of gross revenue and are subject to the deemed profit percentages for purposes of determining the CSLL and IRPJ tax base; (ii) amounts arising from the trading of items recorded as non-current assets, since they do not reflect the company's main corporate purpose, are not part of gross revenue and must be taxed as "Other Revenue," under the capital gains regime (GCAP), without application of the deemed profit percentages for purposes of determining the CSLL and IRPJ tax base.
Prior Positions of the Tax Authorities — COSIT Rulings No. 7/2021 and No. 254/2014
In Ruling No. 7/2021, the requesting party asked about the tax treatment of income derived from a leased property, an activity already included in its corporate purpose. Despite the decision being favorable to the taxpayer (allowing application of the deemed profit percentages to this revenue), the tax authorities presented the following reasoning: income from the sale of a property originally intended to support the company's business activity cannot be considered gross revenue, even if the company's main activity includes the disposal of real estate. This is because a simple accounting and formal maneuver—that is, the mere transfer of the property from non-current to current assets—does not change the actual purpose that the asset performs or performed for the company, and is not sufficient to alter either the legal nature of the income ("Other Revenue") or the tax treatment of its disposal (GCAP).
Ruling No. 254/2014 adopted a similar line of reasoning. In that case, the company had acquired the properties specifically for the purpose of resale, at a time when it was already, in practice, engaged in real estate trading. Thus, the subsequent change in corporate purpose merely reflected a new operational reality that was already underway. In response, the tax authorities allowed the income generated from the disposal of these properties to be subject to the deemed profit percentages for purposes of determining the CSLL and IRPJ tax base.
Analyzing COSIT Rulings No. 7/2021, No. 254/2014, and No. 95/2026 together, it becomes clear that, in the view of the tax authorities, factual reality must prevail over corporate and accounting formalities. The nature of the income—and, by extension, its tax treatment—appears to be determined primarily by the purpose served by the properties in each company's operational reality. However, in this analysis of material reality, it remains unclear whether the property's historical purpose should prevail (as occurred in Ruling No. 95/2026) over the operational activity actually carried out by the company at the time of its disposal. Until this issue is officially addressed by the tax authorities, similar discussions are likely to multiply within the administrative sphere over the coming months.
Lorusso & Partners continues to monitor all developments on this topic and remains available to clarify any relevant questions, as well as to develop customized tax, wealth, and succession planning strategies.
