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Senate approves bill that would allow for updating property values on Income Tax

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The Senate approved Bill nº458/2021, which institutes the Special Regime for Updating and Regularizing Equity (“REARP”), which aims to allow the updating of the value of movable and immovable property, as well as the regularization of assets that have been incorrectly declared in the Income Tax (“IR”). Bill 458/2021 is now being analyzed by the Chamber of Deputies.

In the case of the update, only individuals residing in Brazil will be able to update the value of movable and immovable property that has legally been obtained on the Brazilian territory by December 31st, 2020.

Currently, the government charges between 15% and 22.5% of Income Tax on profits from operations, which correspond to capital gains in cases of a sale.  Seeing as it is impossible to make changes in cases of property appreciation, the taxation ends up being disadvantageous for the property owner.  In the bill approved by the Senate, the owner will be able to make an update on the value by paying only 3% of the difference.

As for the regularization option, individuals or legal entities may control the situation of essential data of goods or rights that are or were under their ownership or title before December 31st, 2020, and that have not been declared or declared incorrectly.

In this case, the bill provides 15% income tax rate on the amount of the assets subject to regularization, in addition to a fine whose value corresponds to 15% of the tax amount, and the payment of income tax and fine must be done together.

In addition, the regularization involves a remission of tax credits that result from non-compliance with tax obligations related to taxable events that occurred up to December 31st, 2020.

Regardless of the mode chosen by the taxpayer, the deadline for application of  REARP is up to 210 days, counted from the Law’s entry into force and, in both cases (updating and regularization), the taxpayer may pay the amount due in a single allotment or in installments of up to 36 months, provided that the installments are no less than R$ 1,000.