Tax planning for a development

An illustrative scene. December, the boardroom of a family-owned developer. Two projects sit on the table: a residential tower designed for families and an office building designed for companies. The founder wants to settle everything in one meeting. Elect the special regime for both, gift part of the shares to the children at book value, and make room for a foreign investor. These look like three separate decisions. They are not.

The fact that ties them together is written in law. Since 2013, every development under Brazil's Special Taxation Regime, the RET, has paid 4% of the revenue received each month. That single payment replaces four federal taxes: IRPJ, CSLL, PIS and Cofins. From 1 January 2027, the tax reform keeps the 4% but splits the bill: 1.92% for income tax and social contribution, 2.08% for the new IBS and CBS. Only developments whose election is effective before 1 January 2029 enter that transition.

The total has not changed. What changed is who can use tax credits, how much succession weighs and what it costs to bring in foreign capital. A development's tax architecture is no longer a regime picked once: it is a chain of linked decisions, and every change in the law reopens the chain.

The special regime is a cash flow decision, not a discount

Law No. 10,931/2004 replaces conventional tax computation with a fixed rate on what actually reaches the bank account, including financial income and contract indexation. The tax follows collections. If the project collects little in a month, it pays little that month, and that predictability is the regime's main appeal.

The price comes in three clauses. Payment is final, with no refund and no offset against other activities. The debts cannot be paid in instalments. And the election is irrevocable until every unit in the registered development plan has been fully paid for. You decide once and live with the decision until the last receivable.

That is why we treat the RET as a long-term cash flow decision. The official service page lists the entry conditions. They include ring-fencing the land, a separate tax ID for each development, a clean record with the federal tax authority and the FGTS fund, and no listing in the federal Cadin registry of debtors. Our advice is to treat that list as a monthly routine, not as a box ticked at entry.

Ring-fencing protects the buyer; the SPE organises the partners

Article 31-A of Law No. 4,591/1964 allows the land, the works and the rights of a development to be held apart from the developer's other assets. This ring-fenced estate, known in Brazil as patrimônio de afetação, answers only for the project's own debts. For someone buying off plan, it means that trouble in another project by the same developer cannot reach theirs.

The RET law extends that shield to the developer's federal tax debts, except those of the regime itself. The reverse does not hold: the developer's general assets still answer for the taxes of the ring-fenced development. The protection runs one way only.

A special purpose company, or SPE, is a second wall with a different job. The RET does not require an SPE; it requires ring-fencing and a separate tax ID. An SPE earns its cost when partners or investors need governance, accounts and profit distribution separated by project. Ring-fencing protects buyers and lenders. The SPE settles who owns what, and the cost of each wall has to fit the size of the project.

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The reform keeps the 4% and changes who can claim credits

Article 485 of Complementary Law No. 214/2025 is the provision that moves the numbers most from 2027. It lets a development whose RET election is effective before 2029 pay IBS and CBS at 2.08% of revenue received. The remaining 1.92% stays with income tax and social contribution. Added up, they reproduce today's split: 1.26% and 0.66% on one side, 0.37% and 1.71% for PIS and Cofins on the other.

The fine print weighs more than the sum. A development in the regime cannot claim IBS and CBS credits on what it buys for the works. Nor can it use the reductions the reform created for real estate, including the social reduction of R$ 100,000 per new home. And a corporate buyer under the standard regime cannot claim a credit on the unit it acquires. Outside the RET, real estate transactions carry IBS and CBS rates cut by 50%.

So the choice between the two routes stops being automatic. The residential tower in our scene, with low-credit works and individual buyers, is likely to stay comfortable in the special regime. The office building may do better outside it, because the buyer's credit becomes a pricing argument. The 2029 deadline turns this analysis into an agenda item.

A well-structured tax bill is not the smallest number on the spreadsheet: it is the number that still stands after the tax audit, the external audit and the succession.

Cost allocation decides the margin the board sees

Under the RET, each development keeps segregated books. Indirect costs, such as head-office administration and shared staff, are allocated in proportion to each project's direct cost within the company's total direct cost. The rule comes from the law. The documentation is yours.

This allocation does not change the RET tax, which falls on revenue. It changes the margin the board sees for each project and, with it, pricing decisions. A poorly documented method distorts the comparison between projects and weakens the defence in a tax audit. Under the reform, IBS and CBS credits linked to those indirect costs must also be reversed.

Outside the RET, classification also drives the tax. Under the presumed profit method, the income tax base is presumed at 8% of gross revenue and the social contribution base at 12%. Complementary Law No. 224/2025 added 10% to those presumption rates on the share of annual revenue above R$ 5 million. Anyone comparing regimes with the old table is comparing against a law that no longer exists.

Succession now starts from market value

Back to the founder and the gift at book value. The ITCMD, the state tax on inheritances and gifts, has an 8% ceiling set by the Federal Senate, as recorded in the guidance of the Minas Gerais State Treasury. Since the 2023 constitutional amendment, it must be progressive according to the value of each share of an estate or gift.

The turning point is Article 154 of Complementary Law No. 227/2026. For unlisted shares, the base must come from a technically sound method, which may consider the project's cash generation. And it cannot fall below net equity adjusted to market value, plus goodwill. In plain terms: holding property at historical cost inside a family holding company no longer lowers the base.

The same law adds up successive gifts between the same people and presumes a sham when a transfer declared as paid goes to someone who cannot prove financial capacity. The holding company remains useful for governance and for rules on heirs joining and leaving. Legitimate succession savings now come from three places: progressivity per heir, the timing of the gift and the quality of the valuation report.

Foreign capital needs substance, not an address

Since January 2026, Law No. 15,270/2025 has subjected profits remitted abroad to a 10% withholding tax, except for results earned up to 2025 whose distribution was approved by the end of that year. The foreign beneficiary may opt for a credit when the company's tax burden plus the withholding exceeds the nominal corporate income tax and social contribution rates. For resident partners, the 10% withholding reaches dividends above R$ 50,000 a month from the same company.

On the other side, the federal tax authority publishes the list of double taxation agreements. It includes Luxembourg, Singapore and Uruguay, and records the treaty with Germany as having no effect since 2006. The terms live in the text of each treaty, not in the reputation of the jurisdiction.

Transactions with countries that tax income below 17% follow transfer pricing rules even between unrelated parties. And a resident who controls an entity abroad may be taxed at 15% on its profit every 31 December. An international structure holds up with a business purpose, real management and consistent documentation. An address without substance becomes cost and risk.

Worked example: a development and a succession side by side

The figures below are InnovaSphere hypotheses built to illustrate the mechanism, not a forecast. The RET rates and the ITCMD ceiling come from the norms cited. The simulator that accompanies this article lets you replace each assumption with your own project's numbers.

The R$ 4.5 million difference exists only if P2 is an honest estimate made under the 2026 law. If the adviser reruns the numbers and lands on 5%, the advantage shrinks to a third. The second stress test shows the other side: because the RET falls on revenue, a project that loses margin pays the same amount and watches the tax consume 80% of its profit. In the succession, the R$ 1 million saving depends on the valuation report. If the report is weak, the saving becomes a contingency.

When it does not pay off

The first case is a thin or uncertain margin. The RET payment is final and calculated on revenue. In a project with a real risk of loss, the actual profit method may produce a lower burden, and irrevocability prevents a change of course later.

The second is a project aimed mainly at companies under the standard IBS and CBS regime. Because the buyer cannot claim a credit on a RET unit, office floors, warehouses and commercial units may be more competitive under the standard regime with its 50% reduction.

The third is a structure out of proportion to the project. SPE, ring-fencing, segregated books, valuation reports and offshore vehicles carry fixed set-up and upkeep costs. In small projects, the layers can cost more than the tax difference, and an offshore vehicle without substance adds tax risk on top.

Checklist for the project's next tax decision

1. Confirm that the ring-fencing is recorded at the property registry, with legal counsel, before filing the election.
2. Check the RET requirements with the accounting team and name who monitors them every month.
3. Model RET and the standard regime with the expected margin and a stress margin, using both the 2026 and the 2027 rules.
4. Document the indirect cost allocation method and keep the calculation file for each development.
5. Put 1 January 2029 on the board's agenda and decide each project's election according to its buyer profile.
6. Commission an independent tax review of the developer's history before comparing regimes, such as the tax regularisation work InnConta carries out.
7. Value the shares at market value with an independent appraiser and submit the report to an external audit, such as the one Valida Auditoria provides, before any gift.

Frequently asked questions

Can I leave the RET if the project stops paying off?

No. The election is irrevocable until every unit in the development plan has been fully paid for. That is why the decision needs stress scenarios, not only the base case.

Do I need an SPE to use the RET?

No. The law requires ring-fencing and a separate tax ID for the development. An SPE is a governance choice, useful when partners or lenders want results separated by project.

What changes in the RET in 2027?

The total stays at 4%, split into 1.92% for IRPJ and CSLL and 2.08% for IBS and CBS, for elections effective before 2029.

Does a family holding company still reduce the ITCMD?

Not through book value. The base for unlisted shares must be at least net equity at market value. The holding company remains valuable for governance; legitimate savings come from progressivity, timing and the valuation report.

Are dividends paid to a partner abroad taxed?

Yes, since 2026, through a 10% withholding tax, with an exception for results up to 2025 approved in time. If there is a treaty with the beneficiary's country, read the official text published by the federal tax authority.

Legal basis

• Law No. 10,931/2004, arts. 1 to 11-A: RET and indirect cost allocation.
• Law No. 4,591/1964, arts. 31-A to 31-F: ring-fenced estate.
• Complementary Law No. 214/2025, arts. 259, 261, 485 and 510: IBS and CBS on real estate and the RET transition.
• Complementary Law No. 224/2025, art. 4: increase in presumption rates.
• Complementary Law No. 227/2026, arts. 147 and 152 to 156: ITCMD.
• Federal Constitution, art. 155, para. 1, and Senate Resolution No. 9/1992: ITCMD ceiling.
• Law No. 9,249/1995, arts. 10, 10-A, 15 and 20: dividends and presumed profit.
• Law No. 15,270/2025: withholding on dividends.
• Law No. 14,754/2023: controlled entities abroad.
• Law No. 9,430/1996, art. 24: favourable tax jurisdictions.