Property Tax In Brazil

Due to the in-depth nature of the system, it is important that you consult an expert tax advisor when considering purchasing property in Brazil. Here you can obtain a brief guideline to the Brazil property tax system.

Tax on Rental Income

Tax is charged on worldwide income for residents of Brazil at 15%, although some foreign tax relief and credits can be allowed under specific tax treaties.

Mortgage interest is not deducted when calculating taxable rental income.

Capital Gains Tax

The following are exempt from capital gains tax:

• Gains from the sale of an individual property, provided a similar sale has not taken place in the previous five years and the total value of the sale does not exceed a specified amount (R$ 440,000 in 2004).
• Amounts received from the sale of assets with a sales price of less than R$ 20,000 per month.
• Gains from the sale of securities on the Brazilian public stock exchange, with a sales price of less than R$ 4,143.50 per month.
• Assets sold during a period of Brazilian residency, acquired during a non-resident period.

Non-residents are normally subject to a flat rate of 15% on gains from property in Brazil.

Note: Various tax treaties could affect the tax rates described above.

VAT

The circulation of merchandise is subject to tax, as are transportation and communication services (ICMS). This is similar to value added taxes in other countries and is set at a rate of 18%, with more specific rates for some goods (for example, 25% on luxury goods).

Inheritance/Wealth Tax

Brazil has no inheritance or wealth taxes. However, some states may impose a death transfer and a donation/gift tax. For example, the state of Sao Paulo adopted an inheritance and gift tax from 1 January 2001.

Stamp Duty

Privately owned offices called Cartórios provide notary services as well as registers of real estate deeds. These cartórios charge from a few cents for simple certified copies to thousands of Realis (R$) for property deeds.

Included in the fees charged for real estate transfers are transfer taxes which vary from 4-5% of the declared value. Cartórios are also responsible for the registration of births, marriages and deaths.

Municipal/Local Tax

Some municipalities may charge a service tax on certain businesses or real estate transfer tax (2% on transfers of real estate). An annual urban real estate tax for property owners is also applicable at approximately 0.6% of the assessed value of the property, but this will vary according to the municipality concerned.