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The New Law Creates Dual VAT (IBS + CBS) and Starts to Include Rental Income, with Transition Rules Between 2026 and 2033. Effective Load for Residential Rent is Expected to Be Around 8%, but There Are Exceptions and Criteria for Individuals.
The taxation of rentals begins to change in Brazil starting on January 1, 2026, with the implementation of the Dual VAT composed of IBS and CBS, created by Complementary Law 214/2025. The law regulates the consumption phase of the Tax Reform and gradually replaces taxes such as PIS/Cofins, ICMS, and ISS by 2033.
In practice, rental income from properties will be part of the new taxes. The transition phase starts in 2026, and over the following years, the weight of the new system increases while the old one recedes. The Federal Revenue and the Ministry of Finance will detail the timeline and guidance materials.
Although the reference rate of VAT is estimated to be around 26% to 28%, there are specific reductions for rentals. For residential rentals, a 70% deduction applies to the VAT base, resulting in an effective load close to 8% to 8.4%. Experts and accounting firms have been using this parameter for simulations.
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What Changes for Landlords Starting in 2026
Legal entities that intermediate or perform rentals will start to collect IBS and CBS according to the rules of LC 214/2025. The rental falls within the scope of “onerous operations with goods or services,” a central concept of the new legislation.
For individuals, the incidence is not automatic in every case. Generally speaking, an individual becomes a contributor to IBS/CBS when they rent more than three properties and exceed R$ 240 thousand in annual revenue in the previous year. There is also the possibility of incidence in the same year if the revenue exceeds R$ 288 thousand, even without reaching the minimum number of properties.
These criteria were widely publicized by consulting firms and sector councils in 2025, based on the text of LC 214 and the technical notes on regulation. The aim is to expand the taxpayer base and reduce informality in the rental market.
Why Is There Talk of “8%” Load on Residential Rent
The calculation of “around 8%” considers a full rate of VAT at approximately 28% and applies a 70% deduction for residential rentals. The result is an effective load estimated between 8.2% and 8.4% on rental income, a parameter that has been used by CRCs and tax professionals for planning estimates.
This number is estimate and depends on the reference rate that will be defined and updated during the transition period. Materials from the Ministry of Finance and the Revenue Service reinforce that there will be progressive implementation until 2033.
For commercial rentals, some analyses indicate different reductions, which may lead to an effective load different from residential. The guidance is to simulate on a case-by-case basis based on the contract profile and the landlord’s activity.
Short-Term Rentals and Digital Platforms: Rule Follows “Hospitality”
Seasonal rentals of up to 90 days, enabled by digital platforms, will follow a logic closer to hospitality. In these cases, the reduction is smaller, at 40% of the base, which may lead to a load around 18% considering a reference rate of 28%.
LC 214 assigns responsibility to the platforms, including those based abroad, for collecting IBS and CBS in certain situations. This operational point is key for those offering properties through hosting apps.
The exact classification depends on the format of the service provided and the contract. To avoid tax audits, experts recommend reviewing the nature of the operation and the flow of tax documents before 2026.
Transition Until 2033 and Existing Contracts
The transition occurs between 2026 and 2033, with coexistence between old and new rules. Starting in 2027, the CBS gains weight, and gradually, IBS enters the system, while PIS/Cofins, ICMS, and ISS are extinguished at the end of the period.
There is a specific transitory regime for fixed-term rental contracts signed and registered by the deadlines in 2025, allowing reduced taxation under defined conditions in LC 214. Companies and landlords must evaluate the adherence and advantages of this regime.
In practice, new contracts starting from 2026 are expected to follow the full rate with sector reductions. Existing contracts may maintain the transitory treatment if formal requirements are met, such as registration with a notary within the deadline.
Will Rent Increase? What Experts Say
The effect on prices is not automatic. It depends on supply and demand, the ability to pass on costs, and the negotiation between landlord and tenant. There is a consensus that the investor’s margin may reduce, but the total pass-through is not guaranteed in highly competitive markets.
Cities with high vacancy and plenty of supply tend to absorb some of the cost. In contrast, heated markets may see some adjustments in new contracts, especially in high-demand rentals. The period of testing and adjustments of the tax system may also affect the pace of adjustments.
For those living off rental income, the recommendation is tax planning and contractual review still in 2025, simulating scenarios of net income, use of credits, and corporate structure when applicable.
In your case, do you believe the new burden should be fully passed on to the tenant or partially absorbed by the owner to keep the property occupied? Leave your comment with your view.
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