In a virtual session that concluded on October 19, 2026, the Brazilian Supreme Federal Court completed its consideration of Theme 1.348 under the general repercussion framework in Extraordinary Appeal No. 1.495.108/SP, with Justice Edson Fachin serving as reporting justice. The Court held that the ITBI tax immunity provided for in art. 156, § 2º, I, da Constituição applies unconditionally to contributions of assets and funds to pay in share capital, regardless of whether the company’s principal activity is real estate, except in cases involving sham transactions or circumvention of the law aimed at improperly obtaining the benefit of the immunity.
The Constitution precludes the imposition of ITBI on transfers of assets to a legal entity as capital contributions, except where the transferee’s predominant activity is the purchase and sale of real estate, the leasing of real property, or commercial leasing. Under art. 37, § 1º, do Código Tributário Nacional, an activity is deemed predominant if it accounts for more than fifty percent of the company’s operating revenue during the statutory period. The question was whether this exception also applied to capital contributions or only to corporate reorganizations. The issue in Theme 1.348 was whether the immunity also extended to companies predominantly engaged in real estate activities.
The Unconditional Immunity Recognized in Theme 1.348
The outcome of the case turned largely on the literal and grammatical interpretation of the constitutional text. The central issue was the phrase “in those cases”[1], which appears at the end of inciso I do § 2º do art. 156 da Constituição Federal, and the determination of which circumstances it referred to. The majority held that the exception based on the transferee’s predominant activity applies only to the second part of the provision, which governs transfers of assets resulting from a merger, absorption, spin-off, or dissolution of a legal entity, and does not extend to the first part, which governs contributions of assets to share capital. On that basis, the majority concluded that immunity for capital contributions is unconditional, regardless of whether real estate is the company’s predominant activity. Justices Gilmar Mendes and Flávio Dino dissented.
The Continuing Limits Under the Brazilian Supreme Federal Court’s Theme 796
Although the ruling represents a significant step forward, it leaves unresolved the dispute that has caused taxpayers the greatest concern, which stems from the misinterpretation by many municipalities of Theme 796 under the general repercussion framework.[2] In recognizing the unconditional immunity, the Supreme Federal Court retained the limit established in that precedent, under which the immunity applies only up to the amount of share capital to be paid in. Relying on that limit, municipal tax authorities continue to impose the tax on the difference between the declared book value and the value at which they assess the property, even when the entire property is contributed to share capital and no capital reserve is created. Some courts have ruled in favor of taxpayers on this issue, but when those rulings reach the Superior Court of Justice, the outcome tends to vary depending on which party appeals. Determining market value is an evidentiary matter, and Súmula 7 and related precedential statements bar the court from reexamining factual findings, leaving the lower court’s ruling undisturbed.
Even so, the ruling provides a tangible benefit to companies engaged in real estate activities. Although municipalities continue to impose the tax on the difference, a charge that remains open to challenge, taxpayers are now assured of immunity at least up to the book value of the assets contributed to share capital.
Consider a property declared at R$100,000.00 and assessed by the municipality at R$500,000.00. Previously, the company’s real estate activities were grounds for denying immunity altogether and imposing the tax on the full R$500,000.00. Now that immunity is recognized up to the amount contributed to share capital, the tax applies, at most, to the R$400,000.00 difference. The closer the value declared by the individual making the contribution is to the municipal assessment, the greater the benefit, as the taxable difference narrows and the likelihood that no tax will be due increases. It should be noted that choosing between historical book cost and market value for the contribution, as permitted by art. 23 da Lei nº 9.249/95, also affects the individual’s income tax liability and capital gains, which warrants assessing each transaction on a case-by-case basis.
The Right to a Tax Refund and the Risk of Limits on the Ruling’s Retroactive Effect
The ruling also opens the door to recovering amounts already paid. Taxpayers who improperly paid ITBI on the portion now recognized as immune may, in principle, seek a refund either through an administrative claim or by filing an action to recover tax unduly paid, subject to the five-year limitations period running from the date of each payment under art. 168, I, do Código Tributário Nacional. Under Súmula 625 do STJ, filing an administrative claim does not interrupt the limitations period for bringing a refund action. Taxpayers who choose the administrative route should therefore keep track of the deadline in case they need to file suit. The Court did not limit the temporal effects of its holding when it announced the judgment, so the holding currently extends to prior payments. Municipalities may, however, seek such a limitation by filing motions for clarification after publication of the judgment, in which case the right to a refund could be limited to taxpayers who already had a judicial proceeding pending. Taxpayers seeking recovery should therefore promptly consider filing suit to improve their chances of qualifying for any exception the Court may establish (the Supreme Federal Court sometimes uses the date of its ruling on the merits as the cutoff).
Cesar Peres Dulac Müller Advogados is available to assess how the ruling applies to individual cases, advise on future capital contributions, and evaluate whether taxes already paid may be recovered.
[1] Text of art. 156, § 2º, I, da Constituição Federal: “§ 2º The tax provided for in item II: I — does not apply to the transfer of assets or rights contributed to a legal entity as payment for share capital or to the transfer of assets or rights resulting from a merger, absorption, spin-off, or dissolution of a legal entity, unless, in those cases, the transferee’s predominant activity is the purchase and sale of those assets or rights, the leasing of real property, or commercial leasing.”
[2] In Theme 796 (RE 796.376/SC, Justice Alexandre de Moraes writing for the Court, decided in 2020), the Supreme Federal Court held that “the ITBI immunity provided for in inciso I do § 2º do art. 156 da Constituição Federal does not extend to the portion of the value of the assets that exceeds the amount of share capital to be paid in.” The case involved a property whose value exceeded the subscribed share capital. The excess was credited to a capital reserve account, and the Court held that it could be taxed. Several municipalities, however, have since invoked the precedent to tax the mere difference between the value declared by the taxpayer and the assessed market value, even when the property’s full value is credited to share capital and no capital reserve is created. Those facts differ from those of the case the Court decided.