Brazil Real Estate- Restrictions on Foreign Ownership

There are not many strict restrictions for foreign ownership of real estate in Brazil. Foreigners generally are able to enjoy the same rights as nationals with the exceptions of certain restrictions preventing foreigners purchasing property in an area of national security, near international borders and on the coast. Rural property has laws about foreign ownership as well, and of course all such matters should be discussed with your attorney.

The official language of Brazil is Portuguese.


Brazil Real Estate- Buying Property in Brazil

Transferring real estate in Brazil can be done in two ways: Rights of Possession or Rights of Ownership (Title). To avoid lawsuits and ensure you the rightful owner of your property, it is wise to obtain real estate granting Rights of Ownership (Title).

Learning about the language will help your business in investing in real estate in Brazil. You will gain greater trust and understanding with your real estate agent and lawyer about the process. Finding a professional, English speaking attorney would be a very smart decision, as they will be able to guide you through the entire process. Chances are the Brazilians who say they speak English cannot speak it very well.

Other than the challenge of communicating properly, the process for transferring property in Brazil is really straightforward. Most transactions involving real estate are completed within two months. Brazil has a good system in place for land registry.

In Brazil, title insurance is available.

1- Acquire a CPF Number
A Cadastro das Pessoas Fisicas  or CPF is required to buy property in Brazil. Foreigners may obtain this number easily and it is used for registration, documentation and identification of individuals during financial transactions.

2- Inspect the property’s matricula
This document states the full history of all judicial, legal and financial transactions associated with the property. A copy of this document should be requested before committing to any property. Also stated in this document are a description, exact address and location, mortgages, past and present ownership information and other such information. For around $7, the matricula may be requested at a local notary’s office and takes three to five days to obtain. All properties involved in some kind of legal or financial transaction, or that were constructed since December 31, 1973 will have a matrcula. If the property does not have a matricula, get the existing title and all precious titles for at least the past 20 years. Remember that you buy what is on the paper, not he property itself, so make sure the description documented precisely matches the real property. You will avoid possible future legal complications by having your attorney thoroughly check this document.

3- Closing
Once the price with the seller is agreed upon and you and your attorney are both satisfied that everything is in order, a deposit of 5% and 20% is usually made. On the agreed day of closing, the balance will paid and the deed will be transferred. The deed then must be registered with the Registro Imobilidrio. Your attorney or local notary public may carry out the step of registration.


Brazil Real Estate- Transaction Costs

The seller is responsible for the real estate agents commission, around 5%.

The buyer is responsible for the notary public fee unless negotiations have been made with the seller. The fee is around $200 in Rio de Janeiro. The buyer is also responsible for the Registro Imobilidrio fees, where the title will be recorded. The fees vary from city to city and in Rio registration is about $200.

Brazil Real Estate- Taxes

Transfer Tax- The Transfer Tax (ITBI) rate depends on location, and is charged by each municipality. In Sao Paulo, the rates vary from 2% to 6%, depending on the property’s value.

Property that is gifted or inherited is not subject to ITBI.

An additional cost applies for property owned by the government. The cost is associated with the disposal of the rights related to such property. Depending on the properties value, these fees range from about 2.5% to 5%.

Sales Tax- State VAT (ICMS) is imposed on communication services, local and national transportation and most consumer goods and on the import of these good and services. There is a 18% tax for intra-state transactions, 7% to 12% tax for inter-state transactions and between 18% to 25% tax for imports. The tax for communication services is between 13% to 35%.

Inheritance and Gift Tax- Gifts, inheritance and wealth is subject to ITCD, (Tax of the Transmission of Causa Mortis and Donation). Usually around 4% of the property’s appraised value, the amount will vary depending on the province.

Rental Income Tax- Non-residents are subject to a withholding tax of 15%. The rental income received by residents of Brazil is treated as regular income.

Property Tax- An annual tax, IPTU (Imposto sobre a propriedade Territorial Urbana), is payable by owners of real estate. Depending on the location and municipality, the rates will vary, and the fee is to be paid in the municipality where the property is located. This tax rate has no fixed minimum or maximum limit set by state or federal laws. A corresponding federal tax, ITR is for rural properties.

Capital Gains Tax- A tax rate of 15% is subject on the sale of your property.  Any gains from the sale of real estate acquired by the seller before 1970 is exempt from tax for residents of Brazil. A progressive reduction on the capital gains tax is levied on all proceeds from real estate acquired by the seller between 1970 and 1988.

Brazil Real Estate- Financing

Financing comes with unattractive terms in Brazil….if you can find financing. For financing, pooling funds with a group of friends or investors, or acquiring a loan for m your U.S. bank is your best option.


Brazil Real Estate- Where To Put Your Money

A beachfront in Brazil, especially in Rio is ideal, and will prove to be a good decision. Prices in the popular neighborhoods in Rio can be high, as mush as $2 million for a beachfront apartment.

Younger areas in Rio like Recreio and Barra de Tijuca of experienced somewhat of a migration from areas like Copacabana and Ipanema in the last 20 years or so. These younger areas have more open space and the population is less dense. The prices are less expensive, but the beaches are just as nice. These areas resemble a more suburban feel; you will need car to go to a restaurant or to the store for groceries, and it is a distance from the more exciting parts of the city. If you are in the market for a vacation home, these areas may not be the most appealing to foreigners. Well-priced apartments can be found on the beach.

In the beach areas, such as Barra da Tijuca are appealing areas to consider investing. There is a lot of activity in these areas, and the residents from Rio are moving in that direction, and prices are rising.


Brazil Real Estate- Off-plan Real Estate in Rio

A good strategy to buying real estate in Brazil is to buy off-plan. Terms may be offered on pre-construction projects by many developers on the 10 or so new developments started a year. Financing may the best option by going this route.

The payment plans associated with this option may be complicated. You could pay 5% when you sing the contract and another 5% when the escritura (deed) is signed, and an additional 5% 30 days after the escritura. Then, 60 months of payments of around 0.8% plus interest and taxes. All loan payments have a government tariff added. There will be 9 quarterly payments of around 3.1% plus interest as well. The final payment is 8% plus interest. You may pay more than 26% over the cash price but the payments are spread out over and beyond the period of construction.

Many of the interest charges can be eliminated if the unit is sold shortly before construction is completed. This is an investment to be made counting on the continued migration of locals into this area. The Barra/Recreio is less crowded and dangerous to live than downtown. The area could be compared to a U.S. Suburb with shopping malls and office buildings.

Because of the little land left by the beach, buying into a new pre-construction project on the beach, your unit could double in a couple of years, creating appealing returns. Prices could double in about three years on investments made on projects a little further from the beach.

Buying on the beach is the best investment. As always, considering the amenities of the building is good practice. Buildings may include a small pool, barbecue area, workout rooms, game and party rooms. Future values of a building with great facilities will be worth the higher price.