Brazilian property transfer tax assessed above the price paid: when the city’s reference value does not hold

When real estate changes hands in Brazil, the municipality levies a transfer tax known as ITBI. Cities routinely calculate it on a reference value of their own, higher than the price stated in the deed, and issue the payment slip on that figure. The Superior Court of Justice has held, in a binding repetitive appeal, that this cannot be done up front and without an administrative proceeding. A buyer who overpaid has five years to claim the difference back.

The rule: the tax base is the transaction value

Article 38 of the Brazilian Tax Code sets the ITBI base as the venal value (valor venal) of the property transferred. In 2022, deciding Repetitive Topic 1,113 (REsp 1,937,821/SP), the First Section of the Superior Court of Justice laid down three binding propositions: the base is the value of the property under normal market conditions, and is not tied to the base used for the annual municipal property tax (IPTU); the transaction value declared by the taxpayer is presumed to match the market; and a municipality may not set the base in advance on the strength of a reference value it established unilaterally.

The presumption is rebuttable, not absolute. A city may disagree with the declared price, but to do so it must open the proceeding provided in article 148 of the Tax Code, with a concrete reason, an individual appraisal of the property and an opportunity for the taxpayer to be heard. Replacing the figure at the moment the payment slip is issued is not an administrative proceeding.

How it shows up in practice

The clearest sign is on the payment slip itself. It usually prints two fields side by side: the declared value, which reproduces the price in the deed, and the tax base, which carries the city’s reference figure. Where the two diverge and the buyer was never notified, the same document serves both as proof of payment and as evidence that the assessment was unilateral.

The gap is rarely small. In recent disputes in the city of Rio de Janeiro, assessed bases running 60 to 80 per cent above the price actually paid produced refund claims in the hundreds of thousands of reais per transaction, at a 3 per cent rate.

What Complementary Law No. 227/2026 changed

Complementary Law No. 227, of January 13, 2026, left the main text of article 38 untouched: the base is still the venal value. What it did was add four paragraphs, and those are what matter.

Paragraph 1 defines venal value as the amount for which the property would be sold for cash, under normal market conditions. The reference to a cash sale is not ornamental: a financed purchase and a cash purchase are not equivalent for comparison purposes.

Paragraph 2 allows the municipality to estimate that amount using technical criteria, and requires it to observe only one of four: prices practised in the market, information from notaries, land registries and lenders, the characteristics of the property, and other parameters customarily used in valuation. That is a low threshold.

Paragraph 3 requires municipal tax authorities to publish the criteria they use, and allows the taxpayer to challenge them by producing a counter-appraisal in a dedicated procedure, as provided in municipal legislation. Paragraph 4 obliges notaries and land registries to share transaction data with the municipality.

Hence the disagreement that has taken hold. On one reading, the statute merely wrote Topic 1,113 into the code, since an adversarial appraisal is still required. On the other, it quietly reversed the burden of proof: the tax authority becomes the first valuer, and it falls to the buyer to dislodge that estimate at its own expense. The point is unsettled.

What the statute does not do is apply retroactively. Under article 144 of the Tax Code, an assessment relates back to the date of the taxable event and is governed by the law then in force. An assessment made before the new statute, without a regular proceeding, is still judged by the rule that applied at the time.

Practical steps

• Keep the payment slip. It is the document that shows, side by side, the declared value and the base actually used. Without it the claim becomes harder to make.
• Check whether any notice was given. The absence of prior notice, of an individual appraisal and of a real opportunity to object is the core of the claim.
• Ask for the criteria. Since Complementary Law No. 227/2026 the municipality has a duty to publish the methodology it applied. Criteria that were never published, or published only in general terms, are the city’s problem, not the taxpayer’s.
• Pay first, litigate afterwards. A settled payment slip is normally required to execute the deed and register the transfer. Payment does not bar a refund, which requires no prior formal protest (article 165, I, of the Tax Code).
• Watch the five-year limitation period, counted from the date of the undue payment (article 168, I, of the Tax Code).

Frequently asked questions

I paid the tax in order to execute the deed. Did I give up the right to challenge it?

No. Article 165, I, of the Tax Code guarantees a refund of tax paid in excess, regardless of any prior protest. Paying in order to complete the transaction is not agreement with the assessed base.

Is an appraisal or expert evidence needed to prove the value of the property?

As a rule, no. What is at stake is the validity of an assessment made without the article 148 procedure, and expert evidence produced today does not cure that omission. The case is normally built on documents: the deed, the payment slip, the payment certificate and the land registry record.

How long is there to claim the difference back?

Five years from the date of the undue payment, under article 168, I, of the Tax Code.

Must a claim be filed with the city hall before going to court?

No. The statute does not make a refund conditional on a prior administrative claim, and article 5, XXXV, of the Constitution bars any requirement to exhaust the administrative route before turning to the courts.

Does this apply to property bought by a company?

Yes. Topic 1,113 draws no distinction between individual and corporate buyers.

Still unsettled

The Federal Supreme Court is examining, in Extraordinary Appeal 1,412,419, whether the ITBI base may be tied to a reference value, a discussion revived by Complementary Law No. 227/2026. As of August 2026 the question of general repercussion was still under review, with no topic number assigned and no order suspending proceedings nationwide. In the meantime, Topic 1,113 remains binding (articles 927, III, and 1,040 of the Code of Civil Procedure). For anyone who has already overpaid, the practical effect of the delay is one thing only: the five-year clock keeps running.