The paid purchase of real estate is a taxable event that generates the Property Transfer Tax (ITBI), paid by purchasers. The rate of this municipal tax varies between 2% and 5% of the transaction value or reference value of the property (calculated based on what each municipality considers to be its market value), whichever is higher.

In the acquisition of real estate by public auction, via judicial auctions, it is common for the purchase values to be well below the market average, due to the logic of the process itself. As a result, the charging of ITBI over on the reference value assigned by the municipalities ends up resulting in payment of a much higher tax than that calculated based on the price actually paid by the purchaser.

In these cases, some cities, such as Rio de Janeiro and Brasília, already provided for an ITBI calculation basis that would be the value of the auction. The judiciary has also decided to the effect and determined that the ITBI should be calculated on the basis of the value of the asset, not the reference value or assessed value assigned by the city government.

Purchasers of real estate at judicial auctions need to be aware of this issue. If the form for payment of the ITBI is issued by the city government considering a calculation basis other than the price actually paid at the auction, it is fitting to evaluate the judicial questioning of the value.