Lagoa do Coelho For Sale in Brazil

Legal and Tax Issues

Definition of non-residence

Natural persons:

The following, among others, shall be considered as non-residents in Brazil:

• Those not residing in Brazil permanently
• Those who entered Brazil with a temporary visa and remained in the country up to 183 days, whether consecutive or not, throughout a period of twelve months.

Legal persons:

A company is understood as resident in Brazil when it has been constituted in conformance with the Brazilian law and has its registered office in Brazil, or when, being constituted in conformance with a foreign law, it has its registered office in the country. 

How are revenues obtained in Brazil by a non-resident taxed?

Immovable property:

The term “immovable property” includes in any case property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of private law respecting landed property apply, as well as usufruct of immovable property and rights to variable or fixed royalties as consideration for the operation or operating concession of mineral deposits, sources or other natural resources.

Income derived from the direct use, letting or use in any other form of immovable property located in Brazil shall be subject to taxation in this country.

These revenues are subject to 15% rate taxation, except in those cases where the beneficiary is a resident or is registered in a country which does not tax according to income, or taxes according to a rate under 20%, in which case they shall be subject to a 25% rate.

The tax is redeemable when the amount due for rent is accrued, and must be settled by the legal representative of the non-resident. 

Capital gains:

The sale of goods and rights located in Brazil by non-residents is subject to definitive taxation as acquired surplus with a 15% rate.

When determining the acquired surplus, the tax exemptions and reductions foreseen for residents in the country shall not be applied.

The gain is calculated from the difference between the transmission amount and the updated purchasing amount according to certain adjusting rates.

The transmission can be executed by the proprietor or by a representative legally appointed by the proprietor. The tax deduction or deposit shall be executed by the purchaser, if s/he is a resident in Brazil, or by the representative of the transferor, if the purchaser is also a non-resident.

Double taxation agreements:

In order to avoid double taxation of income obtained by non-residents in Brazil, it will be necessary to consult the tax regulations of the country of residence, as well as the Double Taxation Agreements. At present, Brazil has Agreements signed with the following countries: Argentina, Austria, Belgium, Canada, Chile, China, Czech Republic, Denmark, Ecuador, Finland, France, Germany, Holland, Hungary, India, Italy, Japan, Luxembourg, Norway, Philippines, Portugal, Slovakia, South Korea, Spain, Sweden and United Kimgdon

The system followed is the imputation of revenues obtained in Brazil on the tax applicable to the recipient (personal income tax or corporate income tax) and the subsequent deduction of the overtaxation amount.

There is no property tax in Brazil.

Are there any restrictions to foreign investment in Brazil?

Foreign investment is forbidden or limited in certain activities, but it is absolutely permitted in the case of immovable investments, with certain restrictions with regard to rural properties.

Is a non-resident natural person forced to register at the Land Register for Natural Persons or at the Land Register for Legal Persons?

Any natural or legal person who owns goods or rights subject to registration at public bodies, such as immovable property, current accounts, shareholding stakes or investments in financial and capital markets, is forced to register at the Land Register for either Natural or Legal Persons, accordingly.

Registration can be carried out by anyone who fills in a specific form and submits it at any Brazilian diplomatic representative office.

What is the legal procedure to purchase and/or transfer an immovable asset in Brazil?

 The purchasing of property takes place when two persons (natural or legal) execute an operation where one of them transfers to the other a specific immovable asset, whether it is by purchase and sale, donation, exchange or any other operation foreseen under Brazilian law.

In order for an immovable asset to be purchased, it is necessary that the transfer certificate (purchase and sale, exchange, donation, etc.) be registered at the relevant Immovable Property Register.   

Urban immovable assets are annually subject to the Landed Property and Urban Territory Tax, local tax on the value of the immovable asset, according to tax rates that vary significantly from one municipality to another. In the case of NATAL, the applicable rate is 0.6% for urban immovable assets under 1,000m2.

The ownership transfer of an immovable asset is subject to the Immovable Property Transfer Tax, which has competencies at municipality level. The tax rate in this case varies between 2% and 6% (depending on the municipality) over the value of the transfer. In the case of NATAL, the applicable rate is 3%.

What is the legal procedure to be followed to let an immovable asset in Brazil?

Attention should be drawn to the preferential purchasing right of the tenant, which means that the proprietor, before transferring the let property to a third party, shall be required to offer the property to the tenant, who is legally granted the right to be preferred as purchaser, in the case of sale.

There is no legal imposition concerning the maximum or minimum rental period. Once the rental period concludes, within the following 30 days, the landlord will be in a position to judicially demand eviction to retrieve his/her property.

It is highlighted that the sale of the property does not imply the termination of the rental contract, but it grants the purchaser the right to, judicially or extrajudicially, terminate the contract.