Properties for Sale in Brazil

Tax and Offshore Investment in Brazil

Tax regimes vary greatly throughout Latin America. While some countries are investor friendly, others are not so open. There are several benefits (i.e. retirement programmes, tax discounts) but also some tax obligations. In this section we provide an analysis of the different tax structure in each country where January First Real Estate lists properties. This information may be very important for you to choose you retirement destination or where to invest. Keep in mind that there are related visa and residence issues which are discussed in Visa/Residence Requirements. In case you need more information or have doubts on any of these issues, the specialised staff in January First Real Estate will be glad to answer all your questions, click here.

Real estate assets are, without doubts, one of the most secure and profitable ways of investment. There are two main reasons for this:

1. Properties always tend to increase their value in the long term.
2. They generate an income for their exploitation (rental/yields).

Taxes and Costs in Brazil

Taxes and Costs
Effective Tax Rate On Rental Income
Monthly Income
US$ 1,500 25%
US$ 6,000 25%
US$ 12,000 25%

Rental Income
The Brazilian tax system encompasses the following tax categories: federal taxes, state taxes and municipal taxes.

Income Tax (Imposto de Renda de Pessoa Fisica)
Brazilian income tax is a federal tax, levied on income and proceeds of any nature received by individuals or corporations. Nonresident taxpayers are only subject to tax on their Brazilian-source income. From 1 January 1999, nonresidents are taxed at a flat rate of 25% on their gross income, without any deductions.

Real Estate Tax (Imposto sobre a Propriedade Predial e Territorial Urbana or IPTU)
A municipal tax, property taxes are imposed on the market value of the real estate. The tax rates vary from one municipality to the other. Typical rates are around 0.5% to 4% of the property value, as assessed by the municipality, an assessment usually lower than market value.

Rural Property Tax (Imposto sobre a Propriedade Territorial Rural or ITR)
Rural property tax levied on the land located outside the urban zones of the municipality. Unlike the IPTU, this is a federal tax. The tax rates vary from 0.03 to 20% depending on the number of hectares of land and the ratio which the utilized area bears to the total land area.

Capital Gains Tax
Capital gains realized by individuals on a sale of real property, are subject to Brazilian tax at a rate of 15%. The taxable gain is computed by deducting the acquisition costs from the gross selling price.
Capital gains earned by nonresidents who reside in countries that do not tax the relevant income or whose income tax rate is less than 20% are taxed in Brazil at a special rate. As of January 2004, capital gains earned by these individuals are subject to a withholding tax rate of 25%.
However, gains are tax-exempt if you have owned the real estate for 20 or more years, or if the real estate is the sole estate you own, and you have owned it for at least 5 years and the sale price is not over, approximately, BRL 582,750 (US$ 259,000).
Capital gains derived by individual residents from the transfer of any property or rights are taxed at a flat rate of 15%, which is final. Capital gains derived from the sale of property or rights where the sales price does not exceed BRL20,000 (US$8,889) are not taxable.
However gains derived from sales of real estate acquired by the seller before 1970 are tax-exempt for Brazilian residents. Real estate acquired by the seller between 1970 and 1988 benefits from a progressive capital gains tax reduction.

Living There
Residents can avail of the following deductions and allowances from their gross annual income:

• Substantiated and un-reimbursed medical, dental, and health-related expenses incurred by the taxpayer and his dependants
  
• Certain contributions and gifts up to 12% of the taxable income
  
• Education expenses incurred by the taxpayer and his dependants; up to BRL2,198 (US$977) per person
  
• Aggregate of the monthly deductions and allowances (see below)
  
  However, all incomes of residents are subject to monthly withholding taxes as advance payment for their final tax liability. The withholding taxes are levied at progressive rates, depending on the monthly taxable income of the resident taxpayers. The taxable income is the monthly gross income less deductions and allowances.
  
  Withholding tax
  Taxable income rate, BRL (US$) / Tax rate
  Up to 1,164 (US$517) / nil
  1,164 –2,326 (US$1,034) / 15%
  Over 2,326 (US$1,034) / 27.5%
  
  Residents can avail of the following deductions and allowances from their gross monthly income:
  
• BRL117 (US$52) per month per year for each qualifying dependant
  
• Contributions paid to the national social security system
  
• Contributions paid to qualified Brazilian private pension funds
  
• Deductible expenses for calculating income from independent services
  
• Alimony and child support payments
  
• The first BRL1,164 (US$517) pension paid by the national social security system to taxpayers more than 65 years old
  

Brazil, make your dream investment come true.