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Even Foreseen by Law, ITBI Became the Target of Criticism for Allowing Municipalities to Set Arbitrary Values and Charge Before the Completion of the Purchase
The Tax on the Transmission of Real Estate (ITBI) is generating controversy for being applied in an abusive manner in various cities in Brazil. Predicted in the 1988 Constitution as a municipal charge, the tax is mandatory to register the transfer of real estate between living persons, but it often surprises buyers when it arises at the end of the acquisition process. In extreme cases, it can cost up to 5% of the property value — an amount that can exceed R$ 50 thousand in large cities.
The problem is not only with the amount charged, but with how it is determined. In many situations, the municipality defines the reference value of the property based on its own estimates, disregarding what was agreed upon between the buyer and seller. This can lead taxpayers to pay tax on a higher value than what was actually negotiated — even after court decisions that prohibit this practice.
Moreover, some municipalities require payment of ITBI even before the deed, disregarding a decision from the STF that determines that the charge can only occur at the time of property registration at the real estate registry. This legal confusion creates insecurity and forces citizens to turn to the courts to correct distortions, incurring additional costs for expertise and lawyers.
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How ITBI Works in Practice
ITBI must be paid at the moment the new owner registers the property at the registry. The charge is activated when:
- The transfer is made between living persons
- Payment is made through purchase
- The transfer is officially registered at the registry
In most cases, the buyer pays the tax. However, in some municipalities, payment is required even before the public deed, which contradicts recent court decisions. The rate varies from 2% to 5%, and the amount is calculated based on the greater of two criteria: the sale value or the assessed value determined by the municipality — often referred to as “reference value”.
This practice has been questioned by buyers in several cities, especially in São Paulo, where cases of charging based on invented values exceed R$ 30 thousand in difference. Nevertheless, the registry only completes the registration if the ITBI is paid, leaving the buyer with no viable alternatives.
Court Decisions Are Not Enough
The Superior Court of Justice (STJ) has already ruled that ITBI must be calculated based on the actual transaction value, and not on estimates from the municipality. Nevertheless, some municipal administrations continue to disregard the decision, forcing taxpayers to face bureaucratic and costly processes.
According to a case reported on the Jusbrasil portal, in São Paulo, a property sold for R$ 2 million had the ITBI charged based on R$ 3.1 million — an amount higher than the sale and the one used for the IPTU. The difference raised the tax from R$ 60 thousand to R$ 95 thousand. The buyer was forced to pay the inflated amount to avoid losing the deal.
Legal insecurity also affects registries. Many still require ITBI before the deed because they follow outdated municipal laws, even though this conflicts with decisions from the Supreme Court. This legal impasse creates a cycle of misinformation and forces citizens to comply with contradictory obligations.
Double Charging and Lack of Return
ITBI raises another question: why pay such a high tax when purchasing property if IPTU is already charged annually? The Urban Property and Land Tax, also municipal, should guarantee urban infrastructure, such as streets, schools, and lighting. Yet, the return to the population is often questioned.
Some experts point out that municipalities prefer to collect ITBI and IPTU because they are easier to collect, unlike the betterment contribution — which can only be applied after public works with technical reports that prove the property valuation. In this context, revenue becomes the objective, not compensation to the taxpayer.
Carlos Eduardo Martins, a jurist cited in the video, calls this type of practice “state illicit enrichment”, when the State charges without delivering improvements. He criticizes the replacement of the betterment contribution with more generic taxes that have no direct link to public works.
The Impact on Citizens’ Finances
In the midst of inflation and the depreciation of the real, ITBI represents an even greater burden for those seeking to acquire a home. According to data mentioned in the video, the real was the 5th currency that lost the most value in the world in 2024, going from R$ 4.91 to R$ 6.19 per dollar. This means that, in addition to the high property values, Brazilians still have to face a questionably calculated tax.
This information was disclosed by the channel Elementar, which published an explanatory and investigative video about ITBI, with historical data, court decisions, and real examples of abuses in charging in municipalities like São Paulo. The content highlights how this tax, originally created in 1809 under the name “sisa”, has adapted over time to become one of the most significant forms of municipal revenue, yet with low transparency and high costs to the taxpayer.
With so many taxes that Brazilians already pay, does it make sense to charge just to change the name of a property owner?
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