Real Estate Holding Companies in 2026: Is It Still Worth Setting One Up for Rental Income?

Few legal structures have generated as much controversy in Brazil as the family real estate holding company. For two decades, it was the main instrument for those seeking lower taxation on rents, asset protection, and estate planning. With the consumption tax reform (EC 132/2023, LC 214/2025, and LC 227/2026), the taxation of dividends (Law 15.270/2025), and the mandatory progressive ITCMD (EC 132/2023 and LC 227/2026), the question that every property owner is asking is legitimate: is it still worth it?

The short answer is: it depends. The long answer is described in this article. This text is of interest to anyone who:

• has rental properties and wants to know if it is worthwhile to set up a holding company in 2026;
• already has a holding company and wants to understand whether to keep it under the new rules;
• is evaluating succession planning in light of the progressive ITCMD;
• lives abroad and owns real estate in Brazil managed by a holding company;
• heard that the tax reform “killed” the holding company and wants to understand what really changed.

To make the analysis concrete, let’s follow the fictional story of Beatriz, a 58-year-old businesswoman who owns four commercial properties in São Paulo, with gross rental income of R$25,000 per month (R$300,000/year). Beatriz has two children and is considering whether to create a holding company in 2026—or if the window of opportunity has already closed.

I explained in detail the overview of the tax changes for 2025-2026 in a separate article on Income Tax in 2026. Here, the focus is exclusively on the holding company.

It is also necessary to mention that I will focus here only on the changes brought about by the most recent laws regarding property rentals. I will leave other aspects related to real estate holding companies, such as property sales, succession planning, and the cost of ITBI (Real Estate Transfer Tax), for future articles.

What changed in 2025-2026 for property owners?

Four laws transformed the real estate tax landscape in just over a year:

The result is that the tax returns of property owners have become more complex. The holding company, which was previously an almost automatic choice for significant rental income, now requires a case-by-case analysis—and those who do not perform this analysis run the risk of paying more tax than they should.

Let’s look at the numbers.

Taxation of rents: individuals vs. holding companies

Individuals: progressive income tax table

Individuals who are tax residents in Brazil and receive rental income pay income tax according to a progressive scale (0% to 27.5%), via monthly tax returns. Law 15,270/2025 was responsible for adjustments that extended the income tax exemption to those earning up to R$ 5,000/month, which benefits owners with low rents.

For those whose main source of income is rent, under this new law, the effective tax rate rises rapidly in the transition bracket, from R$5,000.01 to R$7,350/month, above which income is taxed at 27.5%.

Holding on presumed profit: the “classic” account

The first tax planning technique I learned, while still an undergraduate student with Prof. Schoueri, was precisely the use of a holding company opting for presumed profit for the taxation of real estate rental income, instead of individual taxation. The fact is that most real estate holding companies operate on presumed profit. Taxation on rents works like this:

The additional IRPJ (10% on the portion of presumed profit exceeding R$ 60,000 per quarter) raises the tax burden to ~14.53% on rental income above R$ 62,500/month.

What about dividends? Law 15,270/2025 changes the game

For members who are tax residents in Brazil, IRRF functions as an advance payment of IRPFM (Minimum Individual Income Tax), a minimum taxation mechanism of up to 10% for annual incomes above R$ 600,000.

It is easy to see that the law has created a clear incentive not to concentrate dividend distributions. Family holding companies with more than one partner resident in Brazil for tax purposes can distribute up to R$ 50,000/month to each partner without any withholding—the limit is per beneficiary. This has an impact on tax and succession planning.

Direct comparison: the table that matters in 2026

For Beatriz, with a monthly rent of R$ 25,000, the comparison is as follows:

For Beatriz: the holding company generates savings of approximately R$ 35,600/year (difference between ~23.2% for individuals and 11.33% for the holding company, applied to R$ 300,000), if we do not consider other expenses related to the legal entity itself.

If we estimate fixed expenses (accountant, fees, etc.) at R$ 1,500/month, the above savings are reduced to R$ 17,600/month. So far, the holding company continues to win. But the calculation does not end with rental taxation. It is worth remembering that so far we have been talking about taxation in 2026, without considering the impact of tax reform, which creates the IBS to replace the ICMS and ISS, currently inapplicable to property rentals, and the CBS to replace the PIS/COFINS.

IBS and CBS on property rentals: what will change from 2027?

This is the most talked about change, and the most misunderstood. LC 214/2025 included real estate leasing in the scope of IBS and CBS. For the first time, rents can be taxed by consumption taxes, similar to ICMS or ISS, even if they do not directly involve the provision of a service within the meaning of the Civil Code.

The reductions in the tax rate

Article 261, sole paragraph, of LC 214/2025 granted real estate leases a 70% reduction on the standard IBS/CBS tax rate. With the reference rate estimated at 26.5% (we do not yet know if this will be the case), this results in an effective rate of:

• 26.5% x (100% – 70%) = ~7.95%

It is also worth mentioning that short-term rentals, i.e., less than 90 days, as in the case of those made via Airbnb and Booking.com, have a lower reduction of only 40%, so that the effective rate is double: 26.5% x (100% – 40%) = 15.9%.

There will also be a social reduction of R$ 600/month per residential property (art. 260), which eliminates taxation on residential rents of up to R$ 600 and significantly reduces the tax base for lower rents.

When an individual becomes an IBS/CBS taxpayer

The PF is only liable for IBS/CBS when it cumulatively meets two criteria in the previous year (Article 251 of LC 214/2025):

As the table shows, those who own fewer than four properties may also be liable for IBS/CBS when, in the current year, they have more than R$ 288,000/year in rental income, regardless of the number of properties.

Beatriz, with four properties and an annual income of R$300,000, would meet both criteria. If she keeps the properties in her name in 2027, she will have to pay IBS/CBS in addition to IRPF—accumulating charges that could exceed 30% of total taxation.

Those below these thresholds—for example, those who have two properties rented for R$ 250,000/year—continue to pay only IRPF, without IBS/CBS. This is an important protection for small property owners.

It is also worth mentioning that the IBS/CBS legislation does not distinguish between residents and non-residents for IRPF purposes. Non-residents, who are subject to paying 15% IRRF on rentals, may also be subject to IBS/CBS if they meet any of the criteria mentioned above.

Transitional regime: 3.65% for old contracts

For property leases that were already subject to PIS/COFINS because they were carried out by real estate holding companies, LC 214/2025 created an optional transition regime (art. 487) for lease agreements entered into before January 16, 2025:

• Combined rate of 3.65% (reflecting cumulative PIS/COFINS)
• Term: until the end of the contract (non-residential lease) or until December 31, 2028 (residential lease)
• Sealing of IBS/CBS credits and social reducer

For real estate holding companies that registered their contracts by December 31, 2025, the burden remains at current levels until at least 2028.

Projection of the holding company’s tax burden with IBS/CBS

The replacement of PIS/COFINS (3.65%) with IBS/CBS (~7.95%) will increase the LP holding company’s tax burden in the definitive scenario (2033):

The tax burden rises from ~11.33% to ~15.6% in the final scenario. Even so, for Beatriz, the holding company remains cheaper than the PF — which would pay ~23.2% income tax plus ~7.95% IBS/CBS = ~31.15%.

It is worth mentioning that the above projection does not consider that, in the case of the real estate holding company, there would also be a new 10% tax on the distribution of dividends to individual partners. This is an additional tax that does not apply to real estate owned directly by individuals. The exact amount of this 10% depends on the measurement of the real estate holding company’s profit after all the taxes mentioned and other expenses, so it may vary. However, it is easy to see that, at least for the example above, the real estate holding company will be more advantageous.

Impact on Beatriz’s account

Returning to Beatriz’s example, now with the IBS/CBS tax burden, with R$ 25,000/month in rent and a tax burden of 11.33%, Beatriz would have a distributable profit of ~R$ 22,168/month — below the R$ 50,000 limit. Therefore, her dividends are not subject to withholding, even after the change in the law, as long as Beatriz is a tax resident in Brazil.

If Beatriz were to leave permanently, becoming a non-resident, and if the real estate holding company had no other expenses and distributed all its profits monthly, there would be an additional 10%, or ~R$ 2,217/month, leaving ~R$ 19,951/month for Beatriz.

Except in the case of non-residents, dividend taxation only begins to have an impact on monthly income above ~R$ 56,000/month (when dividends exceed R$ 50,000). At these levels, the total holding company tax burden rises significantly:

Conclusion: the holding company remains advantageous in all income brackets, but the difference has narrowed for incomes above approximately R$ 56,000/month. For Beatriz’s bracket (R$ 25,000/month), the impact of dividends is zero—she remains entirely in the tax-exempt bracket.

After all, is it worth creating a holding company in 2026?

Focusing solely on the topics we have decided to address in this article (the impact of the new taxation on real estate rental activities), it is clear that it is worthwhile to set up a real estate holding company in any of the following situations:

• Rentals above R$ 10,000/month with 4 or more properties
• More than one resident partner, given the exemption for dividends of less than R$ 50,000/month
• Need for heritage preservation, exactly as before the change in the law
• Interest in formalizing real estate management in a professional manner
• Interest in succession planning, a topic that will be the subject of a future article

It is not worthwhile for situations that should not be affected by the IBS/CBS for individuals, or where there would be no non-tax reasons to justify the additional costs of a real estate holding company:

• Rents below R$ 5,000/month (compliance costs exceed tax savings)
• 1 to 2 low-value properties (disproportionate complexity)
• Property financed with fiduciary alienation (cannot be paid in full)
• No heirs or no need for estate planning
• Vacation rentals (Airbnb): if there is no IBS/CBS tax liability for individuals, the tax burden on legal entities will be higher.

At least at first glance, it does not make sense for those who have already set up a real estate holding company to dissolve it. Dissolution generates significant costs (retransfer deeds, possible ITBI, capital gains on the return of real estate) that are difficult to justify. Even with the increase in the tax burden due to the reform, the existing real estate holding company remains competitive—especially for those interested in succession planning.

Conclusion

The year 2026 is a watershed moment for real estate assets in Brazil. Tax reform complicated the equation, but it did not kill real estate holding companies. What changed is that it is no longer an automatic decision, but rather one that requires analysis.

For significant assets—as in Beatriz’s example, with R$ 25,000/month in rent—the holding company continues to offer real tax savings on rents, effective asset protection, and can be a tool for succession planning.

The answer, therefore, is not universal. For those with significant assets, heirs, and a long-term horizon, a holding company remains one of the best tax decisions available. For those with one or two low-value properties and no succession concerns, an individual entity is sufficient.

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