The non-levy of income tax on compensation for transmission lines on rural properties

Despite being a “tropical country, blessed by God and beautiful by nature”, Brazil still has a lot to develop, which requires greater attention to infrastructure.

This can be considered one of the main problems we face, which has been generating an expansion of our generation, transmission and distribution of electrical energy, which becomes visible through the networks built.

Considering its continental size and its natural vocation for agribusiness, practically all cities in the country of Brazil have large rural areas, which consequently translates into the passage of these transmission lines through rural properties throughout the country. 

As these are private properties, it is necessary to establish an administrative easement so that the energy service concessionaires can build the structure of the towers for transmission on the farms. 

Administrative easement is a type of intervention in private property and, although it does not expropriate the area, it imposes use restrictions on the owner.

In the end, and for the purposes of these comments, compensation must be paid for its effective implementation. Compensation may occur at the end of a legal process or by agreement between the parties. 

However, despite being an asset reconstitution, the Federal Revenue understands that this compensation must be taxed. 

For individuals specifically, the understanding of the Federal Revenue of Brazil is published in “Questions and Answers”, the infamous “Question”, for the Individual Income Tax Declaration (DIRPF), as well as in the Consultation Solution COSIT nº 63/2015 (“If there is no specific rule for granting exemption, the amounts received due to the creation of administrative servitude must be taxed by Income Tax”). 

Likewise, in a recent position, the Federal Revenue also published COSIT Consultation Solution nº 274/2023, which indicates that the easement values ​​received by a legal entity opting for presumed profit must also offer these values ​​for taxation. 

However, there is no denying that the compensation has the nature of reconstituting heritage, reduced by intervention in private property, not only due to the use of the area, but mainly due to limitations on the use and enjoyment of the way the owner sees fit, with restrictions on its enjoyment in the form and manner that best suits its owner. 

In practical terms, this restriction is even clearer in the case of rural properties, as there are a series of restrictions close to the transmission line.

A clear example: imagine an area that could be freely used by the owner for forestry (growing trees, such as eucalyptus). With the institution of the transmission line easement, the development of this activity will no longer be possible. Even if trees are already planted in the place where the line will pass, they must be felled. 

Another example is the plot used for soybean cultivation, in which continuous planting will no longer be possible, requiring maneuvers to avoid the towers, and irrigation in the vicinity of the transmission line is unfeasible.

The situations presented only confirm that the compensation received under this heading does not have the capacity to characterize an increase in assets, but only a compensatory nature for the limitation of the use of the property, so that they should not be subject to income tax.

In this sense, jurisprudence has been constructed, mainly from the Federal Regional Court of the 1st Region (which covers the states of AC, AM, AP, DF, GO, MA, MT, PA, RO, RR and TO) and the Superior Court of Justice .

In this way, it is possible for the owner of a rural property who had a transmission line installed on his farm to seek the Judiciary so that he is not obliged to pay income tax on the compensation received, or, if he has already paid, request reimbursement of these values, in order to rule out the illegal position of the Federal Revenue Service. 

*By Fernando Antônio Melo de Carvalho (in the picture), rural producer and lawyer in Brasília