In a decision published in REsp 1,937,821 – SP (2020/0012079-1) on March 3, the Superior Court of Justice (STJ) set The Repetitive Topic 1,113 on the basis for calculating the Real Estate Transfer Tax (ITBI). This decision puts an end to an old discussion about what would be the basis for calculating this tax:

  • the same assessed value used as a basis for calculating the Urban Land and Property Tax (IPTU);
  • the reference value assigned by the municipalities for the purposes of calculating the ITBI exclusively; or
  • the actual price of the transaction assigned by the parties.

The ITBI - or Inter Living Transmission Tax (ITIV) – is a tax of municipal jurisdiction that focuses on onerous transfers of property or rights in real estate (with the exception of warranty rights, such as the constitution of mortgages and fiduciary disposals under guarantee) and on the assignment of rights relating to such onerous transfers.

According to article 38 of the National Tax Code (CTN), the calculation basis of the ITBI is the assessed value of properties or rights that are being transferred. This means, for example, that, in real estate acquisitions, the buyer is responsible for paying the ITBI, whose rate ranges from 2% to 5% (depending on the municipality in which the property is located) on the value of the property or right being transmitted.

This rate generally focuses on the value attributed by the city to the property (reference assigned value) or on the price assigned by the parties to the transaction, which is higher between the two values.

In practice, it is common for the value assigned unilaterally and previously by the municipalities to be higher than the price assigned by the parties to the sale and purchase, leading the ITBI to be calculated on a calculation basis greater than the value of the real estate business.

Although the buyer may administratively question the reference assigned value attributed by the city, this does not mean that this administrative review will be admitted by the municipal authorities to recognize that the price negotiated between the parties is the correct value to be used as a basis for calculating the municipal tax.

Moreover, often buyers do not even administratively question the reference value, because this questioning ends up delaying the realization of the real estate business, since the payment of ITBI is a requirement for the drafting of the deed of sale and purchase of the property.

Considering this information, the Supreme Court has fixed the following theses:

  • the ITBI calculation basis is the value of the property transmitted under normal market conditions and is not linked to the calculation basis of the IPTU, which cannot even be used as a tax floor;
  • the value of the transaction declared by the taxpayer enjoys the presumption that it is consistent with the market value, and that presumption can only be ruled out by the tax administration by the filing of its own administrative proceedings (article 148 of the CTN); and
  • the municipality cannot previously arbitrate the ITBI calculation basis based on a reference value established by it unilaterally.

The decision of the STJ rightly recognizes that the prior fixation of a reference assigned value by the municipalities to serve as the basis for calculating the ITBI is illegal. The price of the property negotiated between the parties shall enjoy a presumption of veracity and good faith and shall be regarded as the one that best reflects the selling value of the property or right under normal market conditions.

The STJ also understood that, although the IPTU has as a calculation basis the assessed value of the property, this assessed value attributed by the municipalities and used as the basis for calculating the IPTU should not be confused with the assessed value that will serve as the basis for calculating the ITBI.

It was also decided that the assessed value attributed by the municipalities for the purposes of calculating the IPTU should not be used or as a minimum floor for calculating the ITBI, because the value for disposal under normal market conditions reflects other market criteria besides those evaluated by the municipal agencies to define the assessed value of the IPTU. The definition of the assessed value of the IPTU is done by sampling, leveling down the value of the properties evaluated. Basically, the footage and the location of the property are taken into account.

Other relevant market criteria in the pricing of the property, such as the state of conservation of the property, existing improvements, the supply and demand of real estate in the region, the existence of encumbrances on the property and the commercial conditions of payment of the price, are not taken into account in this definition of the market value of the IPTU and, therefore, this value is inadequate to serve as the basis for calculating the ITBI.

According to the STJ, it will be up to the taxpayer to inform the sale value of the property or right transmitted (value of the real estate transaction) to be used in the calculation of the tax. If it understands that the amount reported by the taxpayer is lower than what would correspond to the actual sale value of the property, the municipality may review this value within five years through the filing of its own administrative process. Therefore, given this new jurisprudence that can be signed by the STJ, it will be essential that the parties of a real estate transaction gather consistent evidence so that, if the value of the business is questioned by the municipal authorities, they have concrete elements to confirm the value attributed to the real estate transaction.

This decision of the STJ, if it remains and becomes final, will directly impact the calculation of the ITBI paid in real estate transactions. The procedures adopted by the municipalities will need to be revised to reflect the understanding set by the Supreme Court, under penalty of illegality of the requirement of ITBI that is in disagreement with the court's decision.

Dissatisfied with the understanding established by the STJ, the municipality of São Paulo filed an appeal in which it defends, through a motion to clarify, the extinction of the process without the resolution of the merits, keeping controversial the topic defined by the STJ as Repetitive. The municipality also argues that, if the case is not extinguished, the decision changes the parameters affixed because it allegedly exceeded the limits of the requests made.

If the appeal of the municipality of São Paulo is not accepted, the understanding defined by the STJ must be applied to existing lawsuits on this controversy and other cases that discuss the same subject in the future, due to the general repercussion of the issue. Taxpayers who have paid ITBI on a calculation basis greater than the actual value of the transaction in the last five years may question them in court to get those amounts back. To recover the largest amount paid in the past, it will be essential that, in these questions, there is concrete evidence that confirms and validates the value of the real estate transaction practiced.

We understand that this decision of the Supreme Court is right, because it definitively removes the ingrained practice adopted by municipalities to use assigned values for the ITBI requirement, without considering the specificities of the actual real estate business carried out by taxpayers.



ITBI - Portal of the City of Belo Horizonte

Law 5,172/66

Municipal decree 55.196/14 SP

Municipal law 1364/88 RJ

WHALER, Aliomar. Brazilian tax law. 12. ed. Rio de Janeiro: Forensics, 2013. 1575 p.

DE MELO, José Eduardo Soares; PAULSEN, Leandro. Federal, State and Municipal Taxes. 9. ed. Porto Alegre: Livraria do Advogado Editora, 2015. 463 p.