“Decision is in line with social interests and ESG measures; without demolition, the need for labour increases,” says lawyer
A decision of the 25th Federal Civil Court of São Paulo may set an important precedent in the civil construction market. The court held that the construction company Cyrela, which is retrofitting the Hilton Santos Building in Rio de Janeiro, is entitled to the Special Taxation Regime (RET).
The RET is an advantageous benefit for construction companies because it reduces federal taxes on income. Under the RET, taxes are paid at a single rate of 4%. On a normal basis, Income Tax (IRPJ) and CSLL are 34%. PIS and Cofins 9.25% if the company is in the non-cumulative regime, or, at 3.65%, in the cumulative regime.
In the sentence, unlike what the Federal Revenue states, the judge considered that the discussion goes beyond the tax issue and should take into account landscape and environmental preservation aspects.
For the lawyer Luciana Reisspecialized in Infrastructure and Energy and in Contract and Real Estate Law, a partner at Barcellos Tucunduva Advogados, retrofit, more than a simple renovation, is the adaptation of an existing building, improving and modernizing the units, adapting them to the new purpose and social interests.
“It is a model that allows the revitalisation of underutilised or abandoned buildings, bringing benefits to the city, preserving history, as well as representing the reuse of all the material there,” says the lawyer.
Reis agrees with the court’s decision and highlights that the retrofit, in addition to avoiding the demolition of the building and the consequent creation of rubble, avoids all the environmental impact of the production chain of the materials that would be used for the construction of a new building on the site.
“I believe that the decision to extend the benefit of the Special Tax Regime to retrofit constructions is aligned with social interests and ESG measures. It is a measure that can motivate large construction companies to opt for this model of operation, expanding opportunities in the real estate sector, with a positive impact on housing and job creation,” concludes the lawyer.
Source: Luciana Reis is a specialist in the oil, gas, infrastructure and energy sector and in Contract and Real Estate Law, graduated in Law from the Law School of the University of São Paulo (USP), and Partner of Barcellos Tucunduva Advogados.