Legalex

Brazil Frequently Asked Questions

PROPERTY AND TITLE

Q: Can a non-Brazilian individual buy property in Brazil?

A: Yes, there are no major restrictions for foreign buyers when buying residential property. There are, however, some limitations applicable to certain areas such as agricultural, farming land, near Brazil’s international borders, islands and within an approx. 300 meters seashore strip (exactly 33 meters from the highest historical tide mark).

Q: Is the property freehold?

A: Yes, residential property is acquired on a freehold basis except in the approx. 300 meters seashore strip above , when the constitution of condominium is not possible and only rights of use can be acquired.

Q: Is the property freehold?

A: Yes, residential property is acquired on a freehold basis except in the 300 meters seashore strip when the constitution of condominium is not possible and only rights of use can be acquired.

Q: Are the payments made to the developer guaranteed?

A: According to Brazilian law, a new real estate project must have a statement from a local bank on the financial strength or credit worthiness of the developer. Some Local Authorities require a compulsory insurance but this is even highly debatable since only the federal government has jurisdiction on these issues.

In consequence as there is no compulsory insurance or bank guarantee on contractual payments it is up to the developer to decide privately to offer such guarantees.

Q: What happens should the development be delayed more than the time stipulated in the contract? Do I have the option of cancelling the contract and recover the funds paid to the developer?

A: If there is not a specific penalty clause in the contract in case of a late delivery of the property, the purchaser has the possibility to claim damages and losses as per the prevailing regulations under Brazilian law.

Q: Will a Community of owners set up on completion?

A:According to Brazilian law ( Law nº 4591/1964) it is necessary before the transfer of units to the buyers to register the title of the building as well as the by laws and rules that govern the use of the common parts, its management and maintenance.

Q: Will you check on the developer having clear title to the property?

A: Yes, upon receiving your instructions, we shall provide you with our search report based on our findings and the due diligence exercise that we have carried out for the project.

Q: Will my title be properly registered?

A: Yes, we will make sure that the Title Deeds are formalized in front of the Notary Public, all taxes paid and Title Deeds duly registered at the relevant Land Registry so that you appear as the freehold registered owner of the property.

Q: Will I have to personally attend the Notary’s office in Brazil at the time of completing the transaction and signing the Title Deeds?

A: This will not be necessary as we can make arrangements for you to grant Power of Attorney in UK on our behalf so that we can deal with all formalities when completion and signing of the Title Deeds is due.
The Power of Attorney can be either signed before he Brazilian Consul in London or alternatively, locally before a Notary Public and then legalized at the Brazilian Consulate.

CPF

Q: What is the CPF?

A: CPF is the acronym for Cadastro de Pessoas Fisicas which is the equivalent of a fiscal identity number.
Contrary to what many think, it is only required by law at the time of registering the property and completing the transaction not when the private agreement or promise to sell and buy is signed.
Nevertheless, many sellers require from the buyer the early obtention of the CPF ( it is known as CNPJ in case of companies) in order to be able to protect any future action related to the signed contract ( a claim for non-payment, a demand for a refund inc case of late delivery, etc).

Q: Is it necessary to have a CPF/CNPJ when sending payment to a Brazilian account as contractual payments?

A: No, it is not necessary as long as the payments are remitted from abroad.

EXCHANGE CONTROL REGULATIONS- BANKS AND LENDING

Q: Can a non-resident open a bank account in Brazil?

A: The Brazilian Central Bank (Bank of Brazil) clearly indicates that a non-resident can open and hold bank accounts in Brazil. However, in practice, it is very difficult to get a Brazilian bank to open an account to a non-resident.

Q: What information has to be provided to the bank when transferring funds to Brazil?

A: The rules and conditions vary considerably from bank to bank There is no general rule but one must remember that there are exchange control regulations in Brazil. This basically means that every remittance of funds (in this case to buy property) must carry a note or observation that the funds are being imported for the purpose of acquiring a specific property. This should be done by the buyer when ordering the transfer with his/her bank.

Q: Can a non-resident obtain mortgage finance to buy a home in Brazil?

A: As above it is very difficult to borrow from a Brazilian bank. According to existing rules a non-resident requires a CPF number as well as a RNE registration (National Registry of Foreigners) but he can only apply for this after he/she has applied for a permanent visa.

TAXES

Q: What are the taxes and costs involved with the purchase?

A: On average, the acquisition of property will incur approximately 8 to 10 % of the purchase price being 3% Transfer Tax (ITBI), and the rest Notary’s fees, Land Registry’s fees and local taxes. However, the level of ITBI is established by the local Tax Authorities and varies between 2% and 6%.

Q: Are there any other expenses?

A: Our own legal fees for assisting you in the transaction. These are based on the price of the property at a 1% with a minimum charge of 1.750 Euros. This fee excludes any Bank charges and sundries and the notarization of the Power of Attorney and passport/s that you must pay to your Notary when attending locally the signing of the bilingual P of A that we will prepare for you.

We will send you a set of instructions for implementing this procedure and will make the necessary arrangements with your nearest local Notary for the signing of this document. Once the P of A is signed it needs to be legalized as well as the notarized copy of the passport/s and the steps to follow are:

- The legalization of these documents at the Brazilian General Consulate in your country of residence.
- The certification by a sworn translator.

The above involve an additional approximate cost of £ 200, 00 to include the Consular charges and the translator charges.

Please bear in mind that in case of a joint purchase, the legalization of two passports will increase the cost to £ 250.00. This is, £ 50.00 per additional passport.

Q: What taxes do I need to pay on an on going basis as owner of property in Brazil?

A: As an owner of property in Brazil you are liable for payment of IPTU (Urban rates) on a rate depending on the municipality between 0,5% and 2% on the price of the property payable on a yearly basis. The payment of this tax can also be divided into 7 instalments per year.

Q: What is the Income Tax on rentals?

A: Income tax is payable on rental income. There is a minimum exempt of 1.500 R$. Income over this figure is taxable at a progressive rate between 15% and 27,5%.

Q: What is the Capital Gains Tax rate? What expenses can be deducted?

A: Profit made on the sale of a property is taxable at a 15%. Any improvement works carried out on the property are deductible if the proper invoices are provided. If the sales proceeds are reinvested in buying real estate in Brazil within a period of 180 days from the sale, no Capital Gain Tax is assessed.

Q: What is the rate for Death Duties?

A: The rate for Death Duties for non residents is the same as it is for residents in Brazil and it is not fixed. It varies between 4% and 8%.

CONTACTS

Q: What do I need to do once I have decided to proceed with the purchase?

A: A: Contact one of our lawyers at Legalex Group who will guide you through the process and clearly explain your situation, the costs and fees involved, as well as carry out the necessary searches on the title. For that, please call the numbers below or email directly your instructions

Tel.: (+34) 952 77 86 44
Fax: (+34) 952 82 17 10

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