Rent, Tax Credits and Contracts: How Could an 11.3% CBS Rate Affect Commercial Real Estate?
The proposed 11.3% benchmark rate for Brazil’s
Contribution on Goods and Services (CBS) has prompted the real estate industry
to reassess its financial projections and contracts. The rate, calculated by
Brazil’s Federal Court of Accounts (TCU) and released on October 28, is still
subject to approval by the Senate. It exceeds the approximately 9% previously
projected by economists and analysts involved in discussions surrounding the
tax reform.
For office properties, logistics parks and shopping centers, however, the full
11.3% rate would not apply to rental income or property sales. The legislation
provides for reduced rates on real estate transactions, and the ultimate impact
will also depend on available tax credits and negotiated contractual terms.
Tax experts interviewed by REsource emphasize that replacing PIS and Cofins
with the CBS beginning in 2027 does not necessarily mean that all businesses
will pay more or less in taxes. Although the reform is designed to maintain
overall revenue from the taxes being replaced, its effects will vary across
companies and industries.
“This means some sectors may end up paying more, while others pay less,”
explains Fernanda Rizzo, a partner in the Tax & Customs practice at Vieira
Rezende Advogados. Leonardo Battílana, a partner in the Tax & Customs
practice at Veirano Advogados, adds: “The promise is to simplify the system
without increasing overall tax revenue.”
The proposed benchmark rate is also facing scrutiny in the Senate. Senator
Eduardo Braga (MDB-AM), the rapporteur for the proposal that will establish the
rate, criticized the figure on November 3 and called for hearings with those
responsible for the calculations to clarify the factors behind the result.
R$100,000 in monthly rent: What changes?
To illustrate how the tax structure could work,
REsource presents a chart comparing the same conditions under both scenarios: a
total monthly rental payment of R$100,000, including taxes but excluding
condominium fees and municipal property taxes (IPTU).
Under the current cumulative tax regime, PIS and Cofins amount to a combined
3.65%, resulting in R$3,650 in taxes on the R$100,000 payment.
For 2027, using the proposed 11.3% CBS benchmark, the calculation incorporates
the transitional adjustment: the standard CBS rate would be reduced to 11.2%,
while the standard IBS (Goods and Services Tax) rate would be 0.1%. Because the
legislation provides a 70% rate reduction for rental transactions, leases under
the regular tax regime would be subject to a 3.36% CBS rate and a 0.03% IBS
rate, totaling 3.39% of the taxable base.
Since CBS and IBS are calculated on a tax-exclusive basis, the R$100,000 total
payment would consist of R$96,721.15 in rent (the taxable base) and R$3,278.85
in taxes [SEE CHART].
Before accounting for tax credits, the tax burden on this rental payment would
decline slightly for those currently operating under the cumulative regime,
falling from R$3,650 to R$3,278.85 in the 2027 scenario. The final impact,
however, will depend on the tax credits available to both landlords and
tenants.
Tax credits
Understanding who will ultimately bear the tax burden
requires looking beyond the amount shown in the chart. Tax credits allow
businesses, when permitted by law, to offset taxes owed on their own
transactions using taxes paid on qualifying purchases or expenses.
“A tenant operating under the regular tax regime can claim a credit for the tax
paid on rent, which tends to offset the cost,” Battílana notes.
This distinction is particularly relevant for corporate office buildings and
logistics parks occupied by companies subject to different tax regimes. In
shopping centers, the tax profiles of individual retailers must also be
considered. A tenant that is not eligible to claim tax credits may end up
bearing a larger share of any additional costs passed through by the landlord.
Property owners, meanwhile, may be able to reduce the taxes owed on rental
income by applying eligible credits from their own purchases.
“The analysis should not focus solely on the nominal 11.3% rate, but rather on
the effective tax burden after available credits are deducted,” Rizzo says.
For this reason, suppliers, services and capital investments must be evaluated
individually. Businesses with substantial payroll expenses or relatively few
purchases that generate tax credits may have fewer opportunities to offset
their tax liabilities.
The different revenue streams generated by a property also require careful
consideration. Parking, advertising and other services do not automatically
qualify for the reduced rates applicable to rental income.
Real estate investment funds (FIIs) require a separate assessment, as the
legislation establishes circumstances under which these funds are not subject
to IBS and CBS, provided they meet the applicable legal requirements.
Property sales and contracts also face review
That taxable base will not necessarily equal the property's sale price. The legislation provides for an adjustment deduction tied to the property, subject to documentation and legal requirements. This deduction reduces the amount on which taxes are calculated, rather than providing a discount to the buyer.
The chart above illustrates a hypothetical R$10 million property sale, excluding the new taxes, with an adjustment deduction of R$7 million. In this example, CBS and IBS would apply to the remaining R$3 million, generating a tax liability of R$169,500 before credits. This amount does not represent the transaction's total tax burden.
For leases, eligible existing contracts may qualify for a transitional option allowing a combined IBS and CBS payment of 3.65% on gross rental revenue received, matching the rate currently applied under the cumulative regime.
In practice, this option preserves the current tax burden under that regime but does not allow landlords to claim tax credits related to the transaction. Choosing between the available regimes requires comparing the full set of rules, including taxable bases, credits and contract duration, rather than focusing solely on the headline rates.
“In corporate leasing, contracts may require financial and legal revisions to accommodate the new tax framework,” Rizzo says.
Preparing for the transition involves the six priorities highlighted in the accompanying graphic: identifying the tax regimes applicable to each party, modeling cash flow and tax credits, reviewing contracts, organizing property documentation, adapting systems and updating financial projections.
There is also an upcoming operational requirement. Under the official implementation schedule, electronic invoices for real estate transfers (NF-e de Alienação de Bens Imóveis) and electronic service invoices for rental transactions (NFS-e) are scheduled to take effect on December 1, 2026, subject to the rules and exceptions applicable to each taxpayer category.
