By Tax Area

The 1st Panel of the Upper Chamber of CARF, by the majority of votes, ruled out the equivalence of the Real Estate Fund (FII) to a legal entity for tax purposes, considering that the requirements for this classification were not present, pursuant to Art. 2 of Law No. 9.779/1999 (Order No. 9101-006.005).

The FII, as a general rule, is not subject to tax on the transactions of its portfolio. However, according to the aforementioned provision, the FII can be assimilated to a legal entity if its resources are invested in a real estate development that has, as a developer, builder or partner, a shareholder who owns, individually or together with a person related to them, more than 25% of the shares of the FII.

In the specific case, the FII had, as its purpose, the acquisition of commercial properties owned by a certain Company for the lease of such properties to the Company itself or to companies belonging to its economic group. Initially, the FII had a single individual partner who, in turn, was a partner in the controlling company of the Company owner of the properties. In this context, the inspection understood that the individual partner would fall under the provisions of Art. 2 of Law No. 9.779/1999, for being, in short, the effective beneficiary of the fund. 

The majority of the directors, however, raised (i) that this interpretation would represent an extension of the concept of partner established by the corporate law, which prescribes such qualification to the person who holds a direct equity interest in a company, and (ii) that the Company in question could not be qualified as a real estate development, given that the main activity it carries out is the operation of supermarket retail trade.

The order under discussion represents an important precedent for taxpayers, since the CARF adopted a position more in line with the principle of legal certainty by establishing that the requirements for equating a real estate fund with a legal entity, for tax purposes, shall be interpreted in a restrictive way, expansion not allowed.