Updating property values: is it worth paying the tax up front?piva

With the new Law 14.973/24, passed in September 2024, individuals and legal entities (companies) can update the value of their property by the end of this year and thus pay less tax in the future. This can be advantageous for those planning to sell their property, but the decision to pay early requires attention to a few details.

Currently, those who sell a property and receive a higher amount than they originally paid for it, pay between 15% and 22.5% - a progressive percentage, depending on the value of the property - in Income Tax on the so-called 'capital gain' - which is the difference between the purchase price and the sale price of the property. With the new rule, which makes it possible to update the value of the property now, this percentage could drop to 4%, if the person chooses to update the value of the property now. However, the tax payment, even if reduced, will have to be made within the next 90 days, even if the property is only sold in the future.

It is worth remembering that, historically, since 1996, legislation has not allowed the updating of the values of assets and rights, which makes this an attractive new opportunity to reduce taxes.

It is also worth noting that there are some situations in which capital gains may be exempt, such as the sale of residential property for the purchase of another property within 180 days, or in cases of property acquired before 1988.

Advantages and risks of anticipating

The main advantage of updating the value of the property is that you pay a lower tax rate in the future. However, beware: if the property is sold within three years of the update, the taxpayer will pay both the 4% on the updated value and Income Tax on the capital gain, which could increase the total amount to be paid.

Let's look at an example based on the appreciation of properties bought in 2014, considering a 100% increase in value:

Property bought for R$150,000, updated value: R$300,000.
Property bought for R$300,000, updated value: R$600,000.
Property bought for R$ 450 thousand, updated value: R$ 900 thousand.
Property bought for R$ 600,000, updated value: R$ 1.2 million.
Property bought for R$1.2 million, updated value: R$2.4 million.

Under the current rule, the taxpayer would pay income tax on the 100% appreciation, i.e. between 15% and 22.5% on the capital gain. With the new rule, he pays 4% on the amount now updated, anticipating part of the tax.

How do I calculate what is worthwhile?

The decision to pay the tax in advance depends on factors such as the expectation of the sale and the period until the property is sold. If you intend to sell the property in the short term, you may end up paying more tax. However, for those who plan to keep the property for many years, bringing it forward can guarantee significant savings in the future.

Talk to a specialist lawyer to assess your options and ensure you make the best decision regarding your assets.