Stamp Duty and Municipal Tax on Brazilian Property
Investing in property in a foreign country is often a complex process. Of these issues which have to be dealt with, tax can often prove to be the most trying.
Property in Brazil is subject to a number of taxes which investors should be aware of, as they sometimes differ to those which are payable in the UK. These include capital gains tax, property transfer tax, municipal tax and stamp duty.
Brazilian property and the government structure
Brazil is split into 26 regions and one federal district. Each of these regions was guaranteed independence by the country’s constitution that was signed in 1988.
Brasilia is the capital of the Federal District, while the major cities of Rio de Janeiro and Sao Paulo are located in municipalities of the same name.
Other major regions of the country include Belo Horizonte, Campinas, Cuiaba, Curitiba, Florianopolis, Fortaleza, Manaus, Porto Alegre, Recife and Salvador.
Due to their relative independence, every municipality has its own rates of tax and different times and methods of collection.
Municipal Tax on Brazilian property
Buyers of property in Brazil should be aware that as well as national taxes many municipalities require property owners to pay more localised levies.
These include a transfer tax of around two per cent, which is payable to the local administration. A similar tax may also have to be paid on certain business transactions.
An annual urban real estate tax must also be paid, which is usually around 0.6 per cent of the value of the property, however this varies depending on the region.
Guidelines available on the subject of municipal tax are generally vague and buyers should take care to contact the relevant authorities and ensure they know the charges that they are liable for.
For example, in the federal district, rules altered in 2009 meaning that the date urban property tax is due has changed.
On the authorities’ official website it stated that changes in consumer prices mean that the amount of tax charged on all properties, regardless of value, will also be increased by roughly seven per cent.
However, the rate of tax levied on residential buildings in 2009 was just 0.3 per cent.
Stamp Duty on Brazilian property
As with property purchases in Britain, people who chose to buy a house in Brazil will be required to pay a form of Stamp Duty.
In Brazil the levy takes the form of a purchase tax. The amount of money payable on a transaction varies between around two and five per cent of the total value of the property, although this rate can change.
This is slightly higher than the prices paid in the UK, as transactions on property under the value of £125,000 are exempt from stamp duty, while a property would have to cost over £500,001 for a rate of four per cent to be payable.
Preparing for paying tax on Brazilian property
Before moving to Brazil or purchasing property in the country, all people are required to obtain a tax registration number, which can be gained overseas at a Brazilian Embassy or through a lawyer once they arrive in the country. In the UK the embassy of Brazil can be found on Green Street in London.
Anyone who requires legal advice on property in Brazil can contact the UK consular office in Brazil, who will put them in touch with a lawyer. Offices can be found in Rio de Janeiro, Sao Paulo and Brasilia.
