The 1st Panel of the Superior Court of Appeals (STJ) will define whether real estate payment transactions carried out by real estate investment funds (FII) can be taxed by the Real Estate Transfer Tax (ITBI) or are subject to tax immunity because they are a transfer of fiduciary ownership, pursuant to articles 156, II, of the Federal Constitution[1] (CF/88) and 35, II, of the National Tax Code (CTN).[2]

The unprecedented question before the STJ is being examined in Special Appeal 1.492.971/SP.

On September 20, 2022, the judgment of the case was suspended by a request for examination of the case record by Justice Regina Helena Costa, after the reporting judge, Justice Gurgel de Faria, voted to dismiss the taxpayers' appeal in order to recognize the levying of the ITBI.

According to the Justice, in these transactions, acquisition of the property in order to make up the FII's assets is done directly by the fund administrator and paid by issuing new quotas of the fund to the sellers. There is, therefore, an effective conveyance for consideration of ownership of the property, which attracts levying of the ITBI.

Like the Justice, the Court of Appeals of the State of São Paulo also did not recognize the taxpayers' right to immunity from the ITBI, under the argument that shareholders cease to be owners of the property when passing it on to the FII, and therefore there is a transfer of ownership. This position led to the appeal being filed with the STJ.

The dispute translates into a clash between the interpretation of municipal tax authorities and taxpayers, and consequent judicial developments, regarding the possibility of characterizing this transaction, so common in FIIs, as a conveyance of property for consideration, liable to be taxed by the ITBI, under the terms of article 35, II, and 110[3] of the CTN and of article  156, II, CF/88.

Aside from the tax issues, it is important to understand the purpose behind the legal concept of fiduciary ownership, for a correct interpretation of the transactions carried out by the FII. This concept gives cause for, moreover, investment funds to not have legal personality, but be organized constituted as a communion of resources that make up a separate equity, which is inspired in the figure of the trust in Anglo-American law.

Pursuant to Law 8,668/93, FIIs are characterized by being a pool of resources raised through the securities distribution system for investment in real estate projects, which do not have legal personality. The question is pertinent, since the assets of FIIs are made up of assets and rights acquired by the administering institution, in a fiduciary capacity.

The real estate, as well as its earnings and income, are held under the fiduciary ownership of the administrating institution, independently and non-conveyable to its assets. When investors pay for FII quotas by conveying real estate assets, these are transferred, in fiduciary ownership, to the administering institution, constituting separate assets administered for the benefit of the quotaholders.

This is a fiduciary deal that ascribes to the asset the purpose of administration, which distinguishes it from the fiduciary deal in guarantee, since the quotaholders continue to be indirect owners of the property, in their capacity as FII quotaholders.

In other words, in the case under analysis by the STJ, the quotaholders merely allocated the properties they owned to a vehicle to enjoy professional management, receiving in return the quotas, which are nothing more than ideal fractions of the FII's assets.

The objective of this transaction, therefore, is not a conveyance for consideration of ownership of real estate to the fund manager, but to entrust investors' properties to a third party for the specific purpose of asset management.

It must also be considered that the taxable event of the ITBI only occurs with the effective transfer of the ownership of the real estate, which takes place through the competent registration in the real estate registry office, according to the STF's case law.

On the other hand, in the payment of FII quotas through the conveyance of real estate, one could argue that this transfer of real estate is not registered, since it should be registered with the real estate registry that the property is within the FII's assets.

As we saw above, the FII is a pool of resources without legal personality. The property is simply held under the fiduciary ownership of the fund manager for the purpose of managing it for the benefit of the very quotaholders who have paid in full for the property and in favor of whom the quotas that represent ideal fractions of such property have been issued.

In this sense, it is incumbent on the administrator to make the annotation of a series of restrictions provided for in article 7 of Law 8,668/93[4] in the real estate registry, to ensure effectiveness before third parties that the real estate is part of a separate, independent, and non-conveyable equity, not to be confused with the equity itself.

These issues should be considered by the STJ in analyzing the case, especially since "tax law cannot alter the definition, content, and scope of institutes, concepts, and forms of private law," as provided for in article 110 of the CTN.

Although this is not a case subject to the system of repetitive appeals, the decision to be reached by the 1st Panel of the STJ will represent an important precedent for other cases dealing with the same issue and will ensure legal certainty, especially because the state courts have differed on the matter, sometimes upholding and sometimes rejecting the levy.

The issue has not yet been examined by the 2nd Panel of the STJ, which, like the 1st Panel, is part of the Court's 1st Section of Public Law. If the 1st and 2nd Panels adopt divergent positions, the parties may file motions to resolve a divergence for the 1st Section to give the final word on the issue, standardizing the STJ's case law.


[1] “Article 156. It is incumbent on the Municipalities to institute taxes on:


II - transmission "inter vivos", on any account, by an act for consideration, of real estate, by nature or physical accession, and of real rights over real estate, except for collateral rights, as well as assignment of rights to their acquisition;

(...)” (Federal Constitution).

[2] “Article 35. The tax, which falls under the jurisdiction of the states, on the conveyance of real estate and rights related thereto has as its taxable event:


II - the conveyance, for any reason, of real rights on real estate, except for collateral rights;

(...)" (National Tax Code).

[3] “Article 110. The tax law cannot alter the definition, the content, and the reach of institutes, concepts, and forms of private law, used expressly or implicitly by the Federal Constitution, by the Constitutions of the States, or by the Organic Laws of the Federal District or of the Municipalities, to define or limit tax accrual.” (National Tax Code).

[4] “Article 7. The assets and rights that are part of the assets of the Real Estate Investment Fund, in particular real estate held under the fiduciary ownership of the trustee institution, as well as revenue and income therefrom, are not mixed with the assets of the latter, subject, as for such assets and rights, to the following restrictions:

I - they are not part of the administrator's assets;

II - they are not directly or indirectly liable for any obligation of the administering institution;

III - they are not included in the list of assets and rights of the administrator, for the purposes of judicial or extrajudicial liquidation;

IV - they cannot be given as a guarantee for the administering institution's operating debt;

V - they are not subject to execution by any creditors of the administrator, however privileged they may be;

VI - no real encumbrance can be placed on the properties.

Paragraph 1. In the deed of acquisition, the administrating institution shall state the restrictions listed in subsections I to VI, and highlight that the asset acquired is within the Real Estate Investment Fund's assets.

Paragraph 2. The restrictions and the highlighting referred to in the previous paragraph shall be registered with the real estate registry.

Paragraph 3. The administering institution is dispensed from presenting the clearance certificate issued by the National Institute of Social Security, and the Clearance Certificate of Taxes and Contributions, administered by the Federal Revenue Service of Brazil, when disposing of real estate that is part of the Real Estate Investment Fund's assets." (Law 8,668/93).