ITBI TAX - Taxa on Transmission of Real Estate Assests

Can I get an ITBI discount on the purchase of my first property?

Buying a home involves many expenses that are not limited to the value of the property — they are fees and taxes that often take the new owner by surprise. That said, and for the purchase and sale neg otiation to be made official, it is necessary to pay ITBI.

The Tax on Transmission of Real Estate Assets carried out "intervivos" is a tax that must be paid by those who buy in order to make the business official. This is a municipal competence tax that must be paid wherever the property is located.

In this post, we will clarify some issues about the subject, such as the ITBI discount. Good reading!

What is ITBI?

Provided for in the Federal Constitution, the ITBI is a tax burden as important as the other documentation required in the purchase or sale of a property. It is the Real Estate Transfer Tax,  which is levied by the municipality during the negotiation, but paid by the property buyer — that is, by the new owner.

If the fee is not paid, the property will not be transferred to the name of the new buyer. Only after payment of the tax will the property be transferred to the name of the current owner. What should be clear is that, even if part of the property's value is paid in advance, the transfer will still only occur after the ITBI's settlement.

How is ITBI calculated?

The ITBI value varies from one municipality to another, depending on the rate for each one, which can range between 2% and 4% in most Brazilian cities. In addition, there is another important data, which refers to the market value of the property, which can be checked in the IPTU booklet.

To calculate the ITBI value, just know the rate for your municipality and multiply it by the sale value defined by the city hall — even if it is a different amount from the price practiced in the negotiation.

Example: a property worth R$400,000.00 located in Santa Catarina, where the rate is 2%. Multiply the price by the rate:

R$400,000.00 x 2% = R$8,000.00

The amount to be paid from ITBI would be R$8,000.00.

How important is ITBI?

The amount of this tax does not only apply to guaranteeing the acquisition of the property. The collection from ITBI is managed by the city hall, which defines where the funds obtained will be applied.

In general, they are intended for services that serve the population, such as garbage collection, public lighting, asphalt maintenance, water and energy supply, among others.

Who must pay ITBI?

Municipal laws establish that, in a negotiation for the purchase and sale of real estate, it is the buyer who must pay the ITBI tax. However, there is nothing to prevent the seller from being responsible for paying the tax in the contract.

It is noteworthy that, in this case, if there is no payment by the seller, the municipal tax authorities may later collect the tax from the buyer.

What is the relationship between ITBI and the purchase of the first property in terms of discounts?

People who buy their first property can, yes, have a discount on ITBI. However, this will only be possible if the purchase is made through the Housing Finance System (SFH). There are some issues that need to be considered. Look:

• It is important to emphasize that this reduction offered is not a privilege only for those who buy their first property, but for anyone who buys through the Housing Finance System (SFH);
• the rule applies regardless of the municipality where the property is located. However, depending on the value of the asset, the tax is reduced to 0.5%. Remembering that, if the property limit is exceeded, the excess will be charged at the normal rate;
• if a property is purchased through the Minha Casa Minha Vida social program, the buyer will benefit from a 75% ITBI discount.

What is SFH (Housing Finance System)?

It is a real estate financing system  that was created by Law 4,380, of 1964. Since then, it is considered the most important in Brazil, enabling thousands of Brazilians to acquire their own home.

This system includes some housing programs. What stands out the most is Minha Casa Minha Vida — which is already considered one of the largest held in Brazil.

I bought a property in the plant, when should I pay the ITBI?

In the case of a property being purchased while still in the plant, the ITBI will only be charged when the unit is ready - at which time the buyer will also receive the deed and registration of the registration.

This is because the market value of property can be modified at the time of delivery of the good, and the ITBI value will be based on the updated amount. Therefore, having a reservation for this moment is very important, since in addition to the ITBI, there are other taxes, fees and charges that are charged upon delivery of the property.

The tip is to get information about everything that will be needed at that moment. Every experienced broker will know how to inform everything that will be spent after receiving the keys to a property purchased in the plant, as well as all the documentation that must be provided.

What are the consequences of non-payment of ITBI?

If the buyer of the property does not pay this tax, he will not have access to real estate financing. Furthermore, the property will not be transferred to your name as the transfer of ownership will be stopped.

The fact is that there is no law that regulates that the purchase of the first property receives an ITBI discount. For those in this situation, there are good notary discounts that can be taken advantage of.

As you have seen in this article, this is an extremely important tax and should not be forgotten when negotiating the purchase and sale of property. The subject is complex, and relying on the help of experts can help a lot when buying a home and finding out if there is a possibility to take advantage of the ITBI discount.