Real Estate rentals under the Tax Reform: 5 questions and answers to understand the changes

Among the many changes in Brazil’s tax landscape, the Tax Reform alters the real estate landscape, with implications that must be taken into account in real estate rental transactions.

The introduction of the IBS (Tax on Goods and Services) and CBS (Social Contribution on Goods and Services) substantially changes how profits are taxed, requiring a more strategic approach to this type of business.

Below are some questions and answers on this topic:

1. How was it taxed before, and what changes for individuals?

Until now, rental income was subject exclusively to the Individual Income Tax (IRPF), based on the progressive monthly tax schedule, with rates of up to 27.5%, depending on income brackets.

Under the new model, rental income is now subject to IBS and CBS under certain criteria, as discussed below.

2. What makes an individual subject to IBS and CBS taxes in the case of real estate rentals?

An individual will be subject to these taxes if, cumulatively:

• they rent out more than 3 separate properties; and
• they received more than BRL 240,000* from these transactions in the previous calendar year.

Furthermore, if the income from rentals exceeds the annual amount of BRL 288,000 (20% more than BRL 240,000*) and involves more than 3 (three) distinct properties, the individual is considered an IBS and CBS taxpayer as early as that same calendar year. This changed with Decree 12,955/2026. The taxpayer must have more than three separate rental properties.

Note: The amount of BRL 240,000, as specified in the legislation, is adjusted monthly based on the IPCA index starting from the date of publication of the Complementary Law No. 214/2025. Taxpayers should therefore ensure they perform the necessary calculations.

3. Does this affect short-term rentals?

Yes, because under the Tax Reform, rentals of up to 90 days are now treated as hotel services.

Thus, Airbnb hosts, for example, and other similar rental services are now subject to IBS and CBS, in addition to income tax (IR) of up to 27.5% according to the progressive tax schedule.

4. When will the IBS and CBS taxes on real estate leases begin to be levied?

The new taxes will take effect in 2026, albeit at reduced rates based on certain criteria. There will be a transition period, with rates gradually increasing through 2033, when the new rules will be fully implemented.

5. What are the IBS and CBS rates for rental transactions?

The CBS and IBS rates have not yet been set. However, we know they will be around 26.5%. This is expected to occur in the coming months, with the publication of the relevant legislative acts.

In any case, to mitigate the impact of the new taxation, certain reductions have been planned, to be applied to the rates starting from the effective date of implementation.

• Residential leases: IBS and CBS rates reduced by 70%.
• Vacation rentals: 40% reduction.
• For residential leases, a social deduction of BRL 600 per property may be subtracted from the IBS and CBS tax base, up to the limit of the tax base amount.

Also see: Brazilian Real Estate Registry (CIB): what changes with the new Federal Revenue Service Regulatory Instruction

Tax Support for Individuals

The DPC Private division assists taxpayers with tax calculations, tax planning, and maintaining compliance. Count on the advisory support of our team: dpc@dpc.com.br.