An expert tax advisor will help you negotiate the tax system when investing in property in Brazil. Find out the basics below.
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.
The fiscal year runs from 1st January to 31st December.
The rate runs on a three bracket scale covering 0 to 27.5%:
Monthly income: % Rate:
Lower than 12,696 BRL 0
12,696 – 25,380 BRL 15.0%
Over 25,380 BRL 27.5%
The Corporate Tax rate for resident companies is 15%, plus an additional tax of 10% on profits exceeding 240,000 BRL.
The Social Contribution Tax is another federal tax calculated on net income. This rate is 9% and levied on an annual or quarterly basis. The tax rate can therefore reach up to 34% to include social contribution and income surtax. Companies can benefit from reductions or exemptions when they are located in trade-zones.
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.
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 an average rate of 17%, with more specific rates for some goods (for example, 25% on luxury goods).
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.
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 2-4% of the declared value. Cartórios are also responsible for the registration of births, marriages and deaths.
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.