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With New Federal Law Allowing Vehicle Value Updates in Declarations, Brazilians Can Reduce Income Tax on Cars Before Sale. Learn What Changes and Who Can Benefit.
A new legislation signed by the federal government promises to change how Brazilians declare their assets in Income Tax.
The change, applicable throughout Brazil, creates the possibility of reducing Income Tax on cars through an official mechanism that allows for updating the value of vehicles registered in the annual declaration.
The novelty was approved because many taxpayers faced high capital gains tax charges when selling their cars, as the declared value often fell significantly below the real market price.
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Thus, the new law modifies the calculation of this gain, making the process fairer and less burdensome.
How Does the REARP Work and Why Can It Reduce Income Tax on Cars?
The signed text establishes the Special Regime for Asset Update and Regularization (REARP).
Through it, owners of assets acquired until December 31, 2024 can update the value of cars, real estate, and other properties.
The main advantage lies in the cost of this update: instead of paying a tax rate of 15% to 22.5% on capital gains at the time of sale, the taxpayer will pay only 4% on the difference between the old value and the updated value.
In practice, the government aims to balance the system: while it offers a way to reduce Income Tax on cars, it also begins to collect immediately with the fixed rate of 4%.
Why Can the Change Help Those Looking to Sell Their Vehicle?
For many Brazilians, selling a car often raises questions about taxation.
Frequently, the declared value at the time of purchase becomes outdated years later, making it seem like there was a significant profit — when, in reality, there wasn’t.
With the REARP, updating this value reduces the difference between the sale price and the declared value, resulting in a lower capital gain and, therefore, less tax to pay.
In other words, updating the declaration before the sale can reduce Income Tax on cars and avoid unpleasant surprises with the tax authorities.
Additionally, since the rate is fixed, the taxpayer can better predict how much they will pay in this regularization.
Who Can Use the REARP and How to Join
The regime was created for individuals who have declared assets for years and wish to regularize their values. To join, it is necessary to:
- Check if the asset was acquired by 12/31/2024.
- Consult the current market value of the vehicle.
- Calculate the difference between the old value and the updated value.
- Pay the tax rate of 4% set by the law.
- Include the update in the Income Tax declaration.
The process is optional, but it can be highly advantageous for those planning to sell their car in the coming years.
Source: Vrum
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