The Senate recently approved a bill that would allow an income tax exemption on residential rentals to individuals. PL 709/2022 went to the Chamber of Deputies, where it will also be analyzed.
What is remarkable in the text is the incentive given to taxpayers in providing information about lease operations, on the basis of tax incentives.
The benefits include the two parties involved in the lease agreement: for the owners, exemption of part of the amounts received; For tenants, deduct income tax on the amounts paid in rent.
On the other hand, PL also doubles the fine for those who omit or falsify the rental agreement information in the advertisement: 150% of the tax due.
“In other words, the proposal creates economic incentives for landlords and tenants to formally announce rents and more stringently penalize those who do not,” explains Senator Alexandre Silvera (PSD/MG), the author of the initiative.
If approved, the measure will be in effect for five years, between 2023 and 2027.
a Infomoney Details below, the main information and the effect of the measure on the taxpayer.
What changes for the taxpayer?
The tax base today is as follows: the rent of property received by one individual and paid by another individual is subject to taxes, according to the annual progressive rate schedule, which ranges from 0 to 27.5%.
Thus, it is up to the landlord to issue the DARF relating to the carnê-leão and pay the income tax, which expires on the last working day of the month following the month in which the rent is received.
With PL, there are three changes planned:
- Partial exemption upon receipt of values
For owners who are renting out their properties, the amounts received will have a partial exemption of 75% of the residential property lease bond.
“This means that IR will not be levied on a significant percentage of these incomes, thus reducing the tax due,” says the PL text. The taxpayer continues to be taxed, but the tax is levied on a smaller portion of what the current rule establishes.
“If someone receives a rent of R$100,000 per year, with a 75% exemption, they will be taxed only on the remaining R$25,000, according to the progressive rate schedule,” explains Luis Felipe Ferrari, tax attorney and partner of Goulart Penteado.
- Deduction of the amount spent on rent
Amounts spent on renting real estate may be deducted from the income tax base calculation. “It’s a potential savings for those who pay the rent,” says the attorney.
This is because deductions are the amounts a taxpayer can deduct from the tax calculation base, which is made up of taxable income. Practically speaking, year-round expenses are those that, if declared, can reduce the amount a taxpayer will pay as tax — or increase the refund. It is a benefit to whoever pays the rent.
The bill also specifies that fines for non-payment or collection of the IRPF will be doubled when they include rental income from residential property, up to 150% of the tax owed.
What is the purpose of PL?
Today, federal revenue faces a challenge in IR declarations: Many taxpayers don’t report that they pay or receive rent. As a result, tax authorities no longer collect taxes.
“Everyone who pays rent has no point in pointing this out to the IRS. And those who receive rent tend to be omitted so that they do not have to contribute capital gains over value. In other words, it does not matter to one side whether it declares it or not; For the other, advertising is a loss, as it will be taxed,” says Ferrari.
With this said, neither the taxpayer who rents the property, nor the landlord. “The IRS can’t forward the information and there’s no way of knowing who the lessor is to collect the tax. Even though it’s tax evasion, a lot of people don’t get caught,” says the attorney.
Therefore, PL seeks to encourage the provision of information in order to increase revenue collection.
“Given the current level of informality in the Brazilian real estate market, and the difficulty of FRS scrutiny for potential irregularities — given the large number of taxpayers and potentially low values — the proposed benefits tend to increase tax collection,” Senator Silvera details in the PL text.
Thus, the goal is to further regulate the real estate market. The IRS cannot prove certain people’s rent. This is bad for the tax authorities, which do not receive the tax properly, and also for the government, which does not have the real margin of money due to rent,” says the lawyer.
Revenue monitors transactions
The Internal Revenue Service uses a mechanism to detect omissions, catch lies, and point out taxpayer errors in income tax: it crosses over with information.
Basically, everything you report in IR is compared to what other people, companies or entities have declared in their submission of the accounts to the tax authorities.
Therefore, if none of the parties involved in the lease report to revenue the amounts dealt, nothing can be examined. However, if one party makes the declaration, the other party will surely be questioned.
“If the tenant declares that he is paying the rent, and does not notify the landlord in his declaration, he will surely fall into the fine net and the IRS will pay the taxes. On the other hand, if those who receive the payments are declared and those who pay are not informed, they will also be checked by the IRS. – Although they do not have to pay taxes, they will have to correct the ad because it will also go down in the fine grid”, explains Ferrari.
Is the scale positive?
If the PL is approved, the equation changes: whoever rents can deduct part of the values; The tenant must be exempted from a portion of the values.
“It brings a little more balance to all parties. But we’ll have to wait and see if it works out in practice. The omission dynamic can continue, and the difference is that the fine, if the person is caught, will be greater,” notes Ferrari.
With regard to possible approval, the attorney recognizes that there are significant opportunities for the text to be passed.
“I imagine the chance of approval of the text in the room is great. PL liberation had some amendments in the Senate, which shows that the ruling rules did not make many objections to this issue. But it is difficult to solve, and it also has to be subject to the punishment of the president.
Finally, the lawyer believes that “the procedure is interesting for those who receive the rent, and even more so for those who pay, but the revenue also wants the tranche that is currently withheld.”
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