The 2nd Panel of the Superior Court of Justice (STJ) confirmed in the ruling of AREsp 1.760.009/SP, by unanimity of votes, that the event that generates the Real Estate Transfer Tax (ITBI) only occurs with the effective registration of the acquisitive title in the competent land registry, even in cases of transfer of real estate via spin-off of companies.

Since the publication of the decision on June 27, 2022, motions for clarification of judgment have been submitted by the requesting company, on which the Superior Court of Justice (STJ) has already decided – amending the previous judgment – expressing the way in which the claim for refund of undue payment should be executed. The municipality present in the passive pole of the action did not present resources.

In the case decided by the STJ, the company filed a claim for refund of undue payment against the municipality of São Manuel / SP, requiring the repayment of ITBI amounts paid improperly to another municipality, and it was not known this fact at the time of its payment.

The company claims that, as the collection of the ITBI occurred in advance to the registration of the corporate act of spin-off in the property’s title record, at the time of its payment the transmission of the property had not yet occurred and, consequently, the tax triggering event.

The effective registration of the acquisitive title was only verified after georeferencing the property, necessary for the registration of the referred title. The procedure concluded that the property was located in a different municipality than the one in favor of which the ITBI was paid.

The controversies about the timing of the ITBI tax triggering event are many, although the Brazilian Civil Code, in article 1.245, is clear in relation to the fact that the transfer of real estate property only occurs with the registration of the acquisitive title in the competent land registry, and not with the mere signing of the title.

It is the popular saying: "the one who does not register, is not the owner".

The Brazilian Federal Constitution of 1988 (CF/88), in article 156, item II, provides that the ITBI is a tax of municipal jurisdiction charged before the "inter-living transmission, in any capacity, of real estate property, by nature or physical accession, and of in rem rights, except as collateral, as well as the assignment of rights to its acquisition”.

A considerable part of the Brazilian notary offices and land registries, however, does not act in this way.

To prenote the title for registration in the land registry, that is, prior to the registration of the security itself, it is necessary to present the ITBI payment slips or the tax exemption document.

In the specific case of the transmission of real estate via spin-off of companies, for example, there are many municipalities that argue that the constitution of the company on the date of registration of its corporate act in the commercial registry, by itself, would represent the occurrence of the tax triggering event.

There are also municipal laws establishing that, in the case of the transfer of real estate via private instruments (as happens in the division of companies that do not depend on public deed), the ITBI must be collected before the signature of the private instrument or up to 30 days after its signature, which, in our view, contradicts the legal provision of the CF/88 and Brazilian Civil Code.

As stated on Article 110 of the National Tax Code, the tax law cannot change the definition of institutes and concepts of private law to define or limit tax powers. Therefore, if civil law determines that the transfer of real estate property only occurs with the effective registration of the purchase title in the land registry, the tax authorities cannot use another concept to demand payment of the ITBI.

The 2nd Panel of STJ, when evaluating the issue, understood that the event that generates the ITBI only occurs with the registration of the title in the land registry, effective moment of the transfer of the real right. In 2019, in a case analogous to the presently analyzed judgment, STJ had already decided in a similar manner:

FISCAL. INTERNAL APPEAL IN THE REMEDY OF SPECIAL APPEAL. ITBI. TRANSMISSION OF THE PROPERTY. TAX TRIGGERING EVENT. REGISTRATION OF THE LEGAL BUSINESS IN THE COMPETENT LAND REGISTRY. RECURSIABLE FEES PROVIDED FOR IN ART. 85, §11 OF THE FUX CODE. SPECIAL APPEAL BROUGHT UNDER THE CPC/1973. NOT APPLICABLE. INTERNAL APPEAL OF THE MUNICIPALITY OF PORTO ALEGRE/RS TO WHICH IS DENIED.

1. According to the jurisprudential guidance of this Superior Court, even in case of spin-off, the tax triggering event of ITBI is the registration in the competent land registry of the property, in accordance with civil law. Therefore, there is no way to consider as a fact that the date of the companies' constitution by the registration of corporate act in the Commercial Registry. Previous: AgRg in REsp. 798.794/SP, rel. min. FRANCISCO FALCÃO, DJ 6.3.2006; RMS 10.650/DF, rel. min. FRANCISCO PEÇANHA MARTINS, DJ 4.9.2000; AgRg on REsp. 982.625/RJ, rel. min. HUMBERTO MARTINS, DJe 16.6.2008. [...] (AgInt no AREsp 794.303/RS, reporting judge Minister Napoleon Nunes Maia Filho, First Panel, DJe of 13/6/2019.)

It can therefore be concluded that the transfer of real estate via the spin-off of an entrepreneurial company is in no way an exception to the rule. The incidence of ITBI derives only from the effective transfer of ownership or other in rem right over the property (which is not the case of the mere signature or registration of corporate acts in the competent commercial registry, for example).

We perceive as correct the understanding of STJ that the generating fact of ITBI is the moment of registration of the title, regardless of the nature of the purchase title, whether public deed of sale and purchase or corporate act. You don't have to make any kind of differentiation. This ensures the legal certainty of real estate transactions.

In cases where the collection of ITBI is due to corporate transactions, therefore, the only date to be considered for the occurrence of the event that generates the ITBI should be the registration of the corporate act in the transferred property’s title record, and not the date of signature of the corporate instrument or its registration in the commercial registry or civil registration of legal entities.

Taxpayers, however, need to be aware of the specificities of applicable municipal legislation and local internal affairs regulations. It is quite common that the practice of municipal financial departments and land registries is not in accordance with the position stated by STJ and it is necessary to file preventive lawsuits, to be able to proceed with the registration of the title without having to pay the ITBI in advance or not pay the tax plus fine and interest.

Those who have already paid the ITBI due to the mere registration in the commercial registry of the corporate act of spin-off, without the effective transmission of property or other in rem right on the property, can thus judicially postulate the refund of the undue payment.