Amendments of Complementary Law 227/2026 to the ITBI Tax Base: Potential Judicial Disputes

Complementary Law No. 227, dated 01/13/2026 (“LC 227/2026”), which regulated several aspects of the Tax Reform—such as the Steering Committee of the Goods and Services Tax (CGIBS), the administrative tax procedure regarding the Goods and Services Tax (IBS), among other issues—also promoted, through its Article 165, amendments to the National Tax Code (CTN), particularly to the wording of Articles 35, 38, and 41, which govern the Property Transfer Tax on Onerous Inter Vivos Transfers of Real Estate and Related Rights (ITBI).

The new wording conferred upon Articles 35 and 41 of the CTN aimed to align such provisions with the terms of the municipal and district tax competence established in Article 156, item II, combined with Article 147, both of the Federal Constitution.

However, the most sensitive change brought about by LC 227/2026 relates to the ITBI tax base, which continues to be levied on the market value (valor venal) of the transferred assets and rights, pursuant to Article 38 of the CTN.

In this regard, through the inclusion of paragraphs in Article 38 of the CTN, the legislature established technical criteria to determine the market value, defined as the “price at which the asset or right would be negotiated in cash, under normal market conditions” (§1). For this purpose, the use of at least one of the following criteria was mandated: analysis of prices practiced in the real estate market; information provided by notary and registry services and financial agents; location, typology, intended use, standards, and land and construction area, among other property characteristics; and other technical parameters usually observed in real estate appraisals.

Although the new wording seeks to provide objective parameters for determining the market value, these criteria are broad and may result in the unilateral determination of the ITBI tax base by the municipal or district tax administration, regardless of the value actually agreed upon between the parties in the transfer of real estate and/or related rights.

This modification tends to reignite a dispute previously settled by the Superior Court of Justice (STJ) under Theme No. 1,113: On that occasion, the STJ established the precedent that the ITBI tax base is the value of the transferred property under normal market conditions, without any linkage to the IPTU (Urban Property Tax) tax base; that the transaction value declared by the taxpayer enjoys a presumption of compatibility with market value, which can only be rebutted by the Tax Authorities through the proper initiation of a specific administrative proceeding; and that Municipalities cannot previously arbitrate the ITBI tax base grounded on a reference value unilaterally established by them.

Following the enactment of LC 227/2026, however, the transaction value ceases to hold a central position as a criterion for determining the ITBI tax base—that is, the market value of the property or right under normal market conditions. This circumstance may allow Municipalities to employ, among the criteria provided in §2 of Article 38 of the CTN, whichever they deem most appropriate to unilaterally estimate the ITBI tax base, effectively reigniting the exact controversy resolved by the STJ in the judgment of Theme No. 1,113.

Therefore, this presents a considerable risk of legal uncertainty, in a matter that tends to be submitted once again to the Judiciary. Even though §3 of Article 38 of the CTN provides that municipal and district tax administrations must disclose the criteria used to estimate the market value, and that this value may be challenged by the taxpayer upon submission of a counter-appraisal in a specific proceeding—pursuant to specific municipal or district legislation—such provision does not eliminate the potential practical impacts of the dispute.

This is because the possibility of challenging the estimated market value could cause delays and negatively affect negotiations between parties, particularly in real estate transactions that depend on predictability regarding the tax burden applicable to the transfer.

Nor do these impacts seem to be sufficiently minimized by the provision in §4 of Article 38 of the CTN, which establishes that notary and registry services must share information on real estate transactions with the tax administrations of the Municipalities and the Federal District, under penalty of a fine provided for by specific municipal or district law. Although this mechanism may expand the tax administration’s access to market data, it does not, by itself, eliminate the risk of broad or unilateral criteria being adopted when defining the ITBI tax base.

In summary, although Municipalities still depend on updating and adapting their respective legislations to the prescriptions established by LC 227/2026 regarding the criteria for establishing the ITBI tax base, there is a considerable risk that applying these new parameters will cause legal uncertainty and lead taxpayers to file judicial measures.

Our Firm regularly shares analyses on recent developments in tax legislation and remains available to evaluate specific cases and identify the best structure to mitigate risks and potential losses.

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