The real estate market in Brazil is starting to boom, and the choices for potential investments are numerous: apartments, hotels, residential services, lands, lofts, and condos. Either for living or investment, Brazil is the ideal place.
You want to buy a real estate property in Brazil
If you’re considering investing in real estate in Brazil, you have possibly started your research already. There are several factors that should be taken into consideration, such as:
- the reasons for buying property in Brazil,
- the legal issues,
- the property buying process,
- the location of your investment,
- residency and work permit,
- the cost of housing in the area, and
- Brazil’s overall economy.
You’ll also have to take taxes and closing costs into consideration, and these differ from the ones you might be used to in other countries.
Taxes & Costs on your real estate purchase in Brazil
When you buy an investment property in Brazil, there are many taxes you may be expected to pay.
- Property Tax: this is a yearly tax based on the cost of the property. It differs and it’s established locally in every Brazil city, but the amounts generally go from 0.5% to 1.5% of the evaluation of assets, depending on the usage of the property and its location.
- Transfer Tax: this tax, known as Imposto de Transmissão de Bens Imóveis (ITBI), is paid to the Brazil city. ITBI means real estate transfer tax, based on the value of the asset. The amount is generally 2%, having to be paid to officially register the change of property before a notary public. To officially transfer the asset there are some other expenses involved, such as the signature of a public contract and the register of the agreement at a notary public.
- Tax on Rental Income: if you intend on renting out the property to tenants in Brazil, you will have to pay a tax on your rental income. Rental income received from Brazilian property is taxed at 15%.
- Capital Gains Tax: the value depends on the amount of capital gain since the rate goes from 15% to 25%. There is a new bill specifying that every five years a tax benefit can be utilized for capital gain purposes. This is principally for the seller of an asset with a capital gain, and the reinvestment of the value attained toward other real estate assets until 180 days after the sale.
- Corporate Income Tax: if the property you are purchasing in Brazil is to house a new business or a branch of an existing business, you will have to pay a corporate income tax. Corporate income tax is evaluated at the fixed rate of 15% on yearly taxable income, using either the actual profits method or the presumed profits method.
You might also be required to pay closing costs when you purchase an investment property in Brazil. The costs of closing on a property vary from state to state.
Understanding the taxes, and fees involved in property acquisition in Brazil is essential for a successful title transfer. Closing costs usually range from 6.5% to 7.5% of the property’s price tag, excluding the legal fees and title insurance.
Be Aware of the Costs associated with your purchase of your Brazilian real estate property
As in any deal, it’s significant to understand what you’re paying for and why. And, to avoid potential disagreements, later on, the contract should clearly define who’s responsible for each of these payments.
And when making an investment in Brazilian real estate, make sure you learn which taxes and closing fees might apply.
Are you thinking of buying a property in Brazil? Damalion offers you support to find the real estate investment of your dream in Brazil. Please contact your Damalion expert now.
