Brazil’s Tax Transition: Risks and Opportunities in Real Estate

## Details We are facing a tax transition that could redefine the real estate sector, but uncertainty and complexity still bring significant risks and challenges. The ongoing tax reform in Brazil, with the introduction of the Dual VAT, radically changes how consumption taxes are applied. Although there is an expectation of tax rate reductions, the general economic conditions remain challenging, with still high interest rates and limited credit, impacting financing capabilities and the dynamics of real estate investment. In the sector, the 50% reduction in the standard rate for properties and 70% for rentals represents an important evolution. However, the necessary accounting adjustments and adaptation to new systems could be significant bottlenecks. Credit remains restricted, construction costs are high, and demand is still weak, diminishing the certainty that tax changes will immediately translate into increased real estate transactions. Opportunities should be viewed with caution. Fiscal relief may ease the environment, but the accounting complexity demands a proactive and adaptable business profile. Thus, opportunities appear to be limited to well-prepared companies. Risks include the complexity of the new legislation that may hinder immediate actions and the high costs associated with the transition. Financing remains expensive, and demand is still moderate, indicating a scenario where market reactions may take time to materialize, with mismatches between monetary policy and real conditions. In this context, it is prudent to maintain a cautious stance. Waiting for a more favorable credit environment and necessary adjustments to the new tax regime should be priorities. The market should not be accelerated by immediate improvement expectations. Entry should be considered only for specific profiles with clear planning in light of the new tax reality. --- Thiana Imóveis Site: www.thianaimoveis.com.br Phones: (12) 99704 0404 · (12) 3882-5600 Address: Avenida Arthur Costa Filho, 573 - Centro, Caraguatatuba/SP - CEP: 11660-005