ITBI on the Contribution of Real Property to Asset-Holding Companies: A Win for the Taxpayer?

Anyone who transfers real property into a company's capital, a common practice when setting up asset-holding companies, is usually told that the transaction is not subject to ITBI. For companies that buy, sell or lease real estate, however, the rule has never been that simple, and that is precisely what the Brazilian Federal Supreme Court (STF) is deciding in Theme 1,348 (RE 1,495,108).

Asset-holding companies fall squarely within this controversy. In the practical cases in which setting one up is viable, the predominance of the activity of leasing the company's own property is unavoidable, given the exceptional benefit under the tax regime applicable to rental income. The exception is the rare case in which the assets covered by the planning, all of high value, serve as the residence of the members of the family group, with the holding company serving only for succession purposes and for the segregation and protection of assets.

As of September 16, 2026, five justices had voted in favor of taxpayers before the trial was suspended by a request for further review from Justice Alexandre de Moraes. The news is good, but incomplete. The proposed holding guarantees the immunity, that is, an exemption from the tax secured by the Constitution itself, but carves out cases of sham or fraud. It is this carve-out, more than the vote count, that will define the future of these transactions, and it is the subject of this article: what it changes, what risks it creates and how to guard against them.

The impasse lies in a single sentence of the Constitution. Article 156, § 2, I exempts ITBI in two situations: when a partner transfers real property to form the company's capital, and when companies merge, split or are wound up. Immediately afterward, it opens an exception "in such cases": the immunity does not apply if the company receiving the property is engaged primarily in the purchase, sale or lease of real estate, or in financial leasing. Municipalities argue that the exception applies to both situations and rely on the National Tax Code (CTN). Taxpayers reply that it reaches only the second (merger, split or winding-up). The tax cost of each transaction depends on this difference in reading.

The taxpayers' reading, adopted by the reporting justice, is the more convincing one, and not only for grammatical reasons. Contributing to capital means delivering an asset to the company in exchange for an equity interest in it. The property changes owner on paper, but remains economically tied to the same people. There is no disguised sale, but rather the formation of the business itself. Mergers, spin-offs and acquisitions are transactions of a different nature, in which entire estates circulate between companies, and it makes sense that the Constitution reserved an additional filter for them. Consistent with this distinction, the reporting justice found that the CTN rules restricting the immunity in capital contributions did not survive the 1988 Constitution.

The sensitive point lies in the carve-out. Suggested by Justice Cristiano Zanin and accepted by the reporting justice, it sets aside the immunity in cases of "sham or evasion of the law with the aim of improperly benefiting from the tax immunity." At first glance, there is nothing new here. The CTN already authorizes the tax authority to review the assessment "when it is proven that the taxpayer, or a third party acting for the taxpayer's benefit, acted with willful misconduct, fraud or sham" (art. 149, VII). It also already allows the authority to disregard transactions carried out to disguise the occurrence of the taxable event (art. 116, sole paragraph). If the carve-out merely repeats these rules, it is harmless. The problem is that, written into the holding itself, it tends to be read as something more.

This is the point of greatest risk. Sham is a precise legal concept but, without defined criteria, it can become elastic in the hands of those who collect taxes. The CTN requires the tax authority to prove the fraud, and the reporting justice's opinion reaffirms the rule by stating that it falls to the municipal tax authorities to demonstrate it. Yet recognition of the immunity usually depends on an application to the municipality before the property is registered, which in practice shifts to the taxpayer the burden of proving that the transaction is legitimate. If every municipality can presume sham whenever the company is a real estate company, the condition that the STF threw out through the front door will come back in through the window.

The solution is not to remove the carve-out, but to give it contours. Ideally, the judgment, or the case law that comes to apply it, would establish objective criteria for distinguishing a legitimate capital contribution from an artificial one. A transaction with an economic or organizational rationale that goes beyond tax savings can hardly be called a sham, especially when the properties remain in the company for a reasonable period and the value assigned to them corresponds to the capital actually subscribed. Immediate resale to buyers arranged in advance, by contrast, points in the opposite direction. Applied with the burden of proof where the decision itself placed it, such criteria would give certainty to taxpayers and municipalities alike.

On September 29, Justice Alexandre de Moraes delivered his opinion, joining the pro-taxpayer majority, so that the trial now stands at 6 votes in favor of the taxpayer and 2 against, which points to a favorable final result.

Until the trial ends, anyone intending to contribute real property to a company needs to be cautious. There is no definitive holding yet, and the outcome is only settled once the trial concludes. Also still open is the so-called modulation of effects, which will determine whether those who have already paid the tax may claim a refund or whether the decision will apply only prospectively. The limit set by the STF in Theme 796 also remains in force: the immunity does not cover the value of the assets that exceeds the paid-in share capital. In this setting, documentation becomes the best defense. Consistent articles of association or minutes of the capital increase, a well-founded appraisal of the properties and a clear record of the reasons for the transaction form the safest path to the result the STF is signaling.

Theme 1,348 is heading toward closing a long-standing debate in favor of taxpayers, and for good reasons. But the victory will only be complete if the exception does not swallow the rule. An unconditional immunity that can be denied case by case, without criteria, is a conditional immunity under another name. It falls to the STF, in concluding the trial, and to the courts, in applying the holding, to ensure that the carve-out serves to combat real fraud, and not to reopen the debate the Court set out to close. Until then, planning and documentation remain the best tools for those who do not want to depend on luck.

Finally, it is always worth remembering that expressly setting out the business purpose of the transaction in the asset-planning documentation also helps shield the transaction against attempts by the municipal tax authority to allege a supposed effort to hollow out the taxable event.