Tax
How to Reduce ITBI in a Real Estate Purchase and Sale Agreement
The analysis of a Real Estate Purchase and Sale Agreement should, above all, take the tax perspective into account in order to reduce ITBI and ITCMD. See how this can be done
Reducing ITBI in Purchase and Sale Transactions? It is possible, provided that the criteria established by the judiciary are observed.
In a real estate purchase and sale transaction, ITBI will always be charged at a rate of 3%.
But how can the ITBI amount be reduced?
1. How to Reduce ITBI in Real Estate Purchase and Sale Transactions?
ITBI must always be calculated whenever there is a real estate purchase and sale transaction; however, the illegality arises from the criteria established for its assessment.
Most municipal legislation establishes that ITBI must be calculated based on the Reference Assessed Value - VVR, which is illegally established by the municipality and may reach a value 60% higher than the market value of the property.
The Reference Assessed Value was created so that the City Government would not have to audit every transaction, since the taxpayer could report an incorrect amount in the purchase and sale transaction, thereby harming the tax authorities.
However, the Superior Court of Justice, in a Repetitive Appeal (Theme 1,113), ruled that ITBI must be calculated based on the value of the purchase and sale transaction, and not on the Reference Assessed Value
Therefore, it is possible, through legal action, to reduce the impact of ITBI before paying the tax.
2. How to Know Whether ITBI Is Being Charged Incorrectly?
First, using the property’s SQL number, search Google for the Reference Assessed Value for the property’s location.
If the Reference Assessed Value is GREATER than the purchase and sale price, then ITBI will be charged incorrectly by the notary office.
3. How to Reduce ITBI?
To reduce ITBI before the purchase and sale deed is executed, it is necessary to file a legal action and request a preliminary injunction ordering that ITBI be charged in the correct manner
Attention: the preliminary injunction takes 15 to 30 days to be granted, so coordinate this timeframe with the seller and the buyer!
Once the preliminary injunction has been granted, you will complete the transaction correctly directly at the notary office, paying the fair amount of ITBI!
Consult a lawyer and understand the best way to pay the fair amount of ITBI.