One Buyer But Two Tax Bills

Real estate transactions in Brazil often begin with a purchase agreement. The buyer signs. The seller signs. And months or even years later, they finally sign the deed. But what happens if the intended buyer changes in the meantime?

Maybe you want the property in your child’s name. Or perhaps you’re forming a company to hold the asset. If the purchase agreement allows for assignments, you can transfer your rights to someone else. But beware: doing so may trigger the real estate transfer tax (ITBI) all over again.

ITBI (Imposto sobre a Transmissão de Bens Imóveis) is a tax on the transfer of real estate, and it’s typically due when the property transfer is registered at the notary office. However, some municipalities charge it when the purchase agreement is signed. If that agreement is later assigned, the local government might treat it as a second transfer. That can mean two tax bills for a single purchase.

Thankfully, Brazilian law offers another option. Article 467 of the Civil Code allows one party to sign a contract while reserving the right to name the true buyer later. The nominee must be identified within five days unless the contract provides otherwise. If the seller agrees and the nominee accepts, that person is treated as the original buyer from the beginning.

Done correctly, this approach could help avoid a second taxable event. But if the legal formalities aren’t followed or the local tax authority sees the transaction differently, you could still end up paying twice.