Guide to Buying Property in Brazil

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Brazil Property Market

The purchasing of property in Brazil takes place when two persons (natural or legal) execute an operation where one of them transfers to the other a specific immovable asset, whether it is by purchase and sale, donation, exchange or any other operation foreseen under Brazilian law.

In order for an immovable asset to be purchased, it is necessary that the transfer certificate (purchase and sale, exchange, donation, etc.) be registered at the relevant Immovable Property Register.

Urban immovable assets are annually subject to the Landed Property and Urban Territory Tax, local tax on the value of the immovable asset, according to tax rates that vary significantly from one municipality to another. In the case of buying property in Natal, the applicable rate is 0.6% for urban immovable assets under 1,000m2.

The ownership transfer of an immovable asset is subject to the Immovable Property Transfer Tax, which has competencies at municipality level. The tax rate in this case varies between 2% and 6% (depending on the municipality) over the value of the transfer. In the case of NATAL, the applicable rate is 3%.

Attention should be drawn to the preferential purchasing right of the tenant, which means that the proprietor, before transferring the let property to a third party, shall be required to offer the property to the tenant, who is legally granted the right to be preferred as purchaser, in the case of sale.

There is no legal imposition concerning the maximum or minimum rental period. Once the rental period concludes, within the following 30 days, the landlord will be in a position to judicially demand eviction to retrieve his/her property.

It is highlighted that the sale of the property does not imply the termination of the rental contract, but it grants the purchaser the right to, judicially or extrajudicially, terminate the contract.

Immovable Property

The term "immovable property" includes in any case property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of private law respecting landed property apply, as well as infrastructure of immovable property and rights to variable or fixed royalties as consideration for the operation or operating concession of mineral deposits, sources or other natural resources. Income derived from the direct use, letting or use in any other form of immovable property located in Brazil shall be subject to taxation in this country.

These revenues are subject to 15% rate taxation, except in those cases where the beneficiary is a resident or is registered in a country which does not tax according to income, or taxes according to a rate under 20%, in which case they shall be subject to a 25% rate.

The tax is redeemable when the amount due for rent is accrued, and must be settled by the legal representative of the non-resident.

Capital Gains

The sale of goods and rights located in Brazil by non-residents is subject to definitive taxation as acquired surplus with a 15% rate. When determining the acquired surplus, the tax exemptions and reductions foreseen for residents in the country shall not be applied. The gain is calculated from the difference between the transmission amount and the updated purchasing amount according to certain adjusting rates.

The transmission can be executed by the proprietor or by a representative legally appointed by the proprietor. The tax deduction or deposit shall be executed by the purchaser, if s/he is a resident in Brazil, or by the representative of the transferor, if the purchaser is also a non-resident.

Brazil does not have a double taxation agreement with the UK.

There is no property tax in Brazil. Foreign investment is forbidden or limited in certain activities, but it is absolutely permitted in the case of immovable investments, with certain restrictions with regard to rural properties.

Any natural or legal person who owns goods or rights subject to registration at public bodies, such as immovable property, current accounts, shareholding stakes or investments in financial and capital markets, is forced to register at the Land Register for either Natural or Legal Persons, accordingly. Registration can be carried out by anyone who fills in a specific form and submits it at any Brazilian diplomatic representative office.

The above rules and costs may vary from time to time. It is important to use the services of and independent lawyer. Please Request your lawyer to supply you with the up to date situation on purchasing property.

Buyers Guide to Buying a Property in Brazil

Buying property in Brazil can be a complicated process...

As such, investors may find the following purchase guide to Brazil's standard purchase process useful...

Below is the standard property purchase process for buying property in Brazil:

Ownership of land and property by foreigners is permitted, and all property is freehold. Non-residents may invest in property through direct ownership from abroad, or through vehicles (resident companies, partnerships or investment funds). With regards to rural property, there can be some restrictions regarding the size of the area to be acquired.

A purchaser requires a Catastro de Pessao Fisica (CPF), a tax registration number, which can be obtained from overseas through the Embassy, or in Brazil through a lawyer.

The cost of the purchase must be brought into Brazil through an international wire transfer to the Banco Central do Brasil, which allows the Government to record all investment into the country from overseas.

Once a buyer has found a suitable investment property, it is necessary to apply for a certificate known as Certidao de Onus Reais. (This is not required if you are buying an off-plan property).

For off-plan purchases it is advisable to carry out all due diligence with regards to checking building licenses are in place, the land is properly registered and has ‘copia da escritura publica’ and a certificate from the notary.

Once the purchaser receives this for the chosen property and has negotiated an agreed price with the vendor, a small non-refundable deposit is usually paid to the seller.

A sales contract is then drawn up which details the full conditions of the sale and also acts as a receipt for the deposit paid.

Finally, it is important to draw up the property’s sales deed completion (‘escritura’) normally carried out at the notary. Once this has been acquired, it should then be taken to the Real Estate Registry Office to effect registry.

Costs of a standard property purchase in Brazil

  • Stamp duty (or purchase tax) at 3% of the purchase price.
  • Government purchase tax of between 2% and 7% of the purchase price.
  • Property transfer tax (ITBI) of 2%, payable at the city hall.
  • Local tax varies between regions, but is normally around 0.6% of the purchase price.
  • Brazilian Income Tax is a federal tax levied on income, and proceeds of any nature, received by individuals
    or corporations.
  • Capital gains received by individuals on the sale of real estate will be subject to Brazilian withholding income
    tax at 15%, applicable to foreign investors who are not domiciled in a tax haven. The gain is determined as
    the difference between the sales price and the acquisition
    cost duly reported on the seller’s annual income tax return. 
  • Foreign investors who are not domiciled in a tax haven can receive tax benefits by applying for ‘Resolution
    BACEN 2689’.  Benefits are as follows: (i) Withholding Income Tax (WHT) rates could vary from 10% to 25%
    rate, depending on the nature of the revenue and origin of the resources (tax havens are exposed to the higher
    rates); (ii) Capital gains could be exempted; and (iii) Earnings
    from Investment Participation Funds (FIP) could be exempted under certain circumstances
    (source: PricewaterhouseCoopers).

Useful facts

  • Cost of residential property in Brazil is a third of that in Spain (Global Property Guide March 07).
  • Cost of living in Natal is 20% of that in the UK .
  • Foreign tourism is expected to grow by 4.3% a year between 2007 and 2014 (World Tourism and Travel Council).
  • The Brazilian Real is the local currency however investment in Estrela do Atlantico will be in Euros only

Source: Obelisk International

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