Real Estate Capital Gains: Constitutional Court Decision – Ruling No. 348/2025 with Impact on Personal Income Tax (IRS)

What was the issue?

• Previously, the tax was calculated based on the Taxable Asset Value (Valor Patrimonial Tributário – VPT), even when the sale occurred for a lower amount, relying on an irrefutable presumption which the Constitutional Court has now ruled to be in violation of the principle of contributive capacity.

• Outcome: For the purposes of determining capital gains, IRS was levied on fictitious profits.

What changes?

• Taxpayers may now provide evidence of the actual sale price.

• As a result, taxation will apply solely to the actual profit.

• This decision affects capital gains calculated up to the year 2014, requiring the Tax Authority to reassess such cases.

Have you already paid tax based on the VPT?

• You may request an official review of the IRS assessment.

Conclusion:

• Personal income tax on real estate capital gains will now be levied on actual profit.

• This marks a move toward greater transparency and fiscal fairness, grounded in the principle of taxation on real income.