Property Ownership Costs
In Brazil, taxes on ownership of real estate are generally lower than in most Western countries. As an owner of Brazilian real estate you will have to bear the following ongoing costs:
- Annual municipal real estate tax: All owners of Brazilian property (both residents and non-residents) must pay annual real estate tax to the local municipal authorities (Imposto Predial e Territorial Urbano, IPTU). This usually works out as less than 1 percen of the property?s assessed value.
- Income Tax: Tax for non-residents on income in Brazil is normally 25 percent (income tax is levied on a sliding scale of 15 to 27.5 percent) but is reduced to 15 percent for passive income such as from property rentals.
- Corporation Tax: There are various company structures through which you can purchase property in Brazil, all with varying liability to corporation tax. You should consult a tax advisor to see all the options.
- Inheritance Tax: English law states that real property (land and buildings) in Brazil are to be governed and dealt with by local Brazilian law when it comes to inheritance tax.
Other property costs
- Lettings and management charges: There are lots of rental and property management agencies to choose from in the key Brazilian tourist hotspots and many estate agents will also offer a property management service, including cleaning and maintenance. They may also offer a tenant-finding service for you, at an extra charge. Shop around for the best rates and quality of service.
- Maintenance: Your maintenance costs will depend on the level of maintenance required (or preferred by you) on your property. A full-time housekeeper (5 days a week, 8 hours a day) will cost you $60 to $120 per month and to have someone simply check on the home weekly (cut the grass, etc.), you will probably spend $25 to $60 per month. Alternatively, you can employ a groundskeeper who will live on the property. These property managers will maintain the house and safeguard it. In addition, they can perform helpful tasks while you are in residence, like grocery shopping and helping to arrange transport to and from the airport.
Selling Property in Brazil
- Estate agent’s fees: Intermediation during property sales in Brazil can only be carried out by an accredited real estate agent. The estate agent?s commission is nearly always paid by the vendor, except in exceptional circumstances. Their commission rate (a percentage of the sale or rental value) is determined by the legislation of the local region, through the Real Estate Agents Regional Councils (CREI). Agents’ fees normally charge between 5 and 6 percent of the purchase price. With new projects, real estate agents often receive only 3 to 4 percent from the developer.
- Capital Gains Tax: When real estate is sold in Brazil, vendors must pay tax on the capital gains they have made based on the property?s increase in value over the course of their ownership at a flat rate of 15 percent. This applies to residents and non-residents alike, in accordance with Brazilian legislation. However in practice, sales prices are often understated in the public title deed to avoid or minimise capital gains tax liability. Moreover, a new tax law has recently been introduced, exempting property sales from Capital Gains Tax in the instance where the proceeds are re-invested in another Brazilian property, although this is limited to a declared value of up to BRL180,000 (USD 76,000).
- Utility costs: Sellers are responsible for all the utility costs up until the time of sale.
- Notary fees: Usually paid for by the buyer, but make sure this is clear when you budget for the sale.
The seller is obliged to sell the property free from defects. The seller is liable for any defects which reduce the value of the property, or prevent the use of the property for a particular purpose. If the property lacks a particular characteristic which the vendor claimed it possessed, he/she is liable.
Vendors must ensure they possess relevant property ownership documents, including the escritura, and make sure they have paid any outstanding tax or utility bills on their property. The seller has to comply with the legal obligations towards those having rights of pre-emption (i.e. first refusal to buy the property when it comes up for sale).
Marketing your property
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The normal means of marketing a property in Brazil is via an estate agent who can also value your property. If you used an agent to buy your Brazilian home, it could make sense to use the same one to sell it, as they will already know the property. Before you take on their services, you should check carefully what they will and will not do in terms of marketing and what they will charge as commission—make sure you shop around to get the best service!
It is increasingly easy these days to sell without using an agent. There are more and more specialist websites and magazines advertising property for sale in Brazil. The key advantage here is avoiding the high estate agents’ fees. You will need to do your research to get the price right. Just looking at the adverts will not be enough. You will need to get out and see comparable properties in your area and check out their facilities. Alternatively, you could try to sell your property at auction.
Organising legal representation
There are two legal professionals you will deal with:
A public notary (escribão): Unlike traditional lawyers, Brazilian notaries are neutral government representatives who act as witnesses to and registrars of property transactions. Under Brazilian law, only deeds of sale (escrituras) witnessed and authorized by a notary can be registered at the land registry. He or she will prepare all the appropriate paperwork and ensure this has been filled out correctly according to the wishes of both parties. The notary also will conduct title searches and has a responsibility to make sure the appropriate property taxes are paid on time.Your estate agent will be able to put you in contact with the notaries they use regularly.
A reputable, English-speaking Brazilian lawyer: It is essential to find an independent lawyer to represent your interests and offer impartial legal advice. You will also need to seek advice on the international dimensions of the transaction and on the critical issue of UK taxation. If you are not intending to be in Brazil during the purchase process, you will need to grant power of attorney to your solicitor who will then act as your legal representative.
Accepting an offer
Once you have agreed on a price with the purchaser, he will need to make a verbal offer through the estate agent. Your lawyer will oversee proceedings, including any deposit or reservation payments and the formal agreement of final purchase price.
Signing a private contract
Once all the necessary legal checks have been completed to the satisfaction of the buyer, you will be ready to sign a private sales contract. Before this stage you should have had the contract translated into English and ideally have English-speaking assistance on hand during the signing. The contract is prepared by the selling broker and signed at the office of the broker.
The private contract details the finer points of exactly what you are selling, and includes all the fundamental information about the sale such as the purchase price (including how and when it should be paid), the list of fixtures and fittings included in the sale, and the completion date when the deeds will be signed and the property transferred into your name.
This agreement commits both buyer and vendor to complete the transaction and at this point the buyer must pay a deposit which will be forfeited if the buyer walks away from the deal subsequently. However, if the vendor reneges on the deal at a later date, the vendor must repay the buyer twice the value of the deposit in compensation.
After all the legal paperwork has been completed, you will be ready to sign the deed of sale (escritura). This is the moment of truth when ownership of the property passes from vendor to buyer. A notary (escribão) must be present at this event to draft the document, then formally witness and register the transfer of ownership on behalf of the Brazilian government.
Both parties will need to provide passports or other proof of identity and unless you speak good Portuguese, the notary will insist that a translator is present to ensure you understand the full implications of the contract you are entering into.
Upon completion, the buyer must pay the balance of the purchase price, all professional fees, transfer taxes and notary fees. Copies of the deeds are then sent to the local land registry and a legal copy of all documentation will be given to each party.
Other Brazil property guides:
- For statistical, demographic and economic data, see the Brazil Fact Sheet.
- For information on Brazil’s property law and markets, view our Brazil Property Guide: Key Facts and Markets
- For information on the purchase process and financing, see the Buying and Financing Guide.