Buying Properties in Brazil for Non-Resident
When deciding to invest in real estate abroad must take into account several factors, such as potential return on investment, dynamics and depth of the real estate market and its ability to stay informed about your investment and the local market. However, one of the main factors that should guide your decision is the regulatory and procedural environment that you will (or not) to ensure the safety of the business and their own tranquility.
The Brazilian authorities encourage foreign investment, as such there are no major restrictions for foreigners to buy and sell residential or commercial property in Brazil. There are however some limitations and/or fees applicable for specific areas such as marine land, Islands, agricultural land and areas near Brazil’s International borders.
Brazil has a system of registration of ownership and a well-developed and safe housing market. There are no restrictions on buying a property in Brazil by foreigners, they should take some extra precautions to ensure that the deal goes peacefully. In this article, we explain what are the main steps and precautions you should take when a foreign investor decide to purchase a property in Brazil, namely:
Documentation required to buy a property in Brazil, Buying a property in the plant in Brazil, rate and taxes payable on the acquisition of property in Brazil, property acquisition process in Brazil, tax and benefits resulting from the sale of property in Brazil.
1 – Personally, in Brazil, the simplest and quickest way to get a CPF is to do in a post office or branch of the Bank of Brazil, taking only your passport and paying a fee of R$ 5.50. You also have to provide an address for delivery of the CPF card, usually the address of a friend, a lawyer or a solicitor served.
2 – Consulate of Brazil in your country by paying a higher rate (varies from country to country) for sending the card to your country , which takes about two months. Can accelerate the process by filling out this form in advance and taking it completed and signed to the consulate.
Legal Assistance and Advice
For a foreigner to buy property in Brazil may be important to obtain legal assistance, especially if you do not speak Portuguese. As foreigners are quite common to be defrauded by sellers or realtors unscrupulous. It will be therefore important to choose a reliable lawyer and a duly registered real estate broker when deciding to buy property in Brazil. The Attorney must be registered with the OAB (Order of Lawyers of Brazil) and the broker must be registered with CRECI (Regional Council of Realtors) the state in which the property is situated.
Your lawyer as well as a good broker will check if the property regularly and supports you to fulfill all the legal requirements of the acquisition. A good service legal assistance include:
. Verification of the ownership of the seller on the property
. Checking the current owners have the correct entitlement to the land and debts
. Verification of the ability of the seller to sell property (including authorization of the wife, if that is the case)
. Verification of the non-existence of mortgages or liens on the property.
. Checking your contract and clearly advising what the obligations are for both parties
. Support in the payment process and transfer of funds
. Ensuring the property is registered in your name correctly at the end of the process.
Due to the amount of paperwork and documents involved will be very difficult to ensure the authenticity and security of the business without the support of these two professionals. Always ask to prove their ability to practice and avoid doing business with professionals not registered in their bodies. Be wary of builders to ensure that you do not need these services or that you recommend a single lawyer.
Buying Property in Plant
To buy a property in the plant or not fully constructed, the builder has to submit several legal documents. The key document and Memorial Record of Incorporation, which are actually fifteen documents, including the following: proof of ownership of the land, construction project approved by GDF, clearance certificates from federal, state and municipal taxes, certificate negative of debt to Social Security, Calculation of the area of buildings, detailed breakdown of the finish and material to be used in construction.
The memorial of incorporation must be registered in the Registry of Estate that covers the region where the project will be built, without this record the builder can not sell the property in the plant during its construction. This document is important because it forces the builder to deliver the property exactly the conditions recorded in the memorial.
Even if you can not verify the legalities of the enterprise in which to acquire , at least do your research on the credibility of the builder and real estate agency who intends to sell the property. There are several reports of foreigners who bought properties ventures that never left the plant with obvious damage to them.
All marketing material distributed in Brazil for enterprises to build should show CRECI agent that makes the release and sale of the enterprise, as well as the number of registration of the Merger Memorial project to be disclosed. Without these two documents, the project can not be released in Brazil.
Visas / Passport
Travellers from most countries will receive an automatic visitors visa entry when visiting Brazil, this is granted for 90 days. It is possible to apply for an extension for a further 90 days at the local police station. Travellers from some countries (particularly the U.S. A.) are required to apply for a Brazilian Visitors Visa at their nearest Brazilian Embassy before travel. Before travelling to Brazil you should have at least 6 months from the return date of your journey until your passport expires.
There is a criteria to meet to qualify for Permanent Residency, residency is dependent on the governments criteria. Your chosen legal advisor will be able to assist you if you apply for residency.
Flight costs to Brazil are still generally quite expensive but there are indications that these are starting to reduce as the market continues to open up and the market becomes more competitive as it certainly will do. Prices fluctuate depending on the season / operator and destination airport.
Property Registration in Brazil
Brazil has a system of registration and safe well-developed properties and and one of the only emerging markets that allow foreigners to own 100% of a property without cost to the foreigner. The Registration of the Property is a legal document that lists a detailed description of the property and where it is registered any change of ownership of the property.
However to be legal owner of a property you need to register a document ownership of the property, or public deed recorded in the office called the Registrar of Estate. Attention, “who does not register does not own,” and this is a situation where many foreigners are defrauded. Must request the registration of the property at the time to mark the signing of the Public Deed of Purchase and Sale.
Borrowing Money to Buy Property
It is not impossible to borrow funds in Brazil to buy a property but it is expensive and the market is not mature. If the repayments are being made from overseas then there is also a currency risk – So generally, we would not recommend this route. Some new build off-plan developments may be offered by the developer with instalment payments over a short period of time (I.e. say over 12 to 24 months). The charges applicable vary from developer to developer. Because Brazil’s economy is doing well, the currency has been strengthening, so you need to be mindful that the actual price you pay in your own currency could increase.If you have property in your own country and would like to borrow against this, then you would be wise to speak with your own Financial Advisor.
Payment of Property Acquisition in Brazil
A contract of purchase and sale should be drafted by the seller and contain all the information about the seller, buyer, location, characteristics of the property and the form of payment. The contract should be signed by both parties or their legal representatives and their firms must be notarized. Usually a sign (between 10% and 30%) is then paid to the seller to ensure that it does not sell the property to another person. It will take at least two documents to buy real estate: the CPF and your passport.
Taxes and registration fees typically range between 5% and 10% of the declared value of the sale and must be paid before the signing of the Public Deed of Purchase and Sale. The costs are divided into:
– ITBI (Tax on Transfer of Real Estate by Act Costly “Inter Vivos”) 2% of the declared value of the transaction and must be paid at the City Hall of the city where the property is located.
-Public Deed of Purchase and Sale – 1% to 1.5% of the declared value, payable to the registry where it is carrying
– Property Registration – 2% of the property value, payable Estate Registry of the District where the property is located. Never forget this step “who does not register does not own,”
– Costs of legal advice – usually 1% to 2% of the purchase price. To avoid problems, opt for this service.
– Property tax (Tax on Urban Land and Land Ownership) – annual property tax of about 0.6% of the property value. Varies according to the Hall where the property is located.
– Laudemio rate (Navy) – some seaside properties are also subject to payment of a fee payable to the Secretary of the Federal Heritage usually 2% to 5% of the transaction amount. Although this is a responsibility of the seller , typically cost and passed to the buyer.
With registration complete and all fees and costs paid, the remainder of the payment must be made to the seller in the conditions outlined in the purchase agreement. If payment is made through international transfer, the Brazilian bank money receiver will retain the money until the seller submits the contract of sale and proves the change of ownership.
Transfer Money for Acquisition of Property in Brazil
To buy a property in Brazil when the buyer is not in the country, it is imperative that funds are sent directly from the buyer to the seller’s account in Brazil, so the transfer is registered with the Central Bank of Brazil. The transfer will be made to the current exchange where the money is released to the seller (usually after 5 days) and will be charged some fees for operation. The seller must provide the contract of purchase and sale and prove the change of ownership for the money to be released. It may be important to have a skilled attorney to ensure that everything runs smoothly.
This allows the government to register its investment in Brazil, in order to ensure there are no problems at the time of transfer the money out of the country, if you decide to sell your property in the future. In general, there are no restrictions on withdrawal of fund from Brazil, where these have been registered with the Central Bank at the time of purchase.
Transfers of properties between foreigners not resident in Brazil can be done without records in the Central Bank, but problems arise in time to withdraw your money from the parents.
Avoid paying more than one booking fee to the real estate agencies or contractors and pay only if you ensure that the money will be sent to Brazil as submitted by you.
Always require receipts for all payments to make.
Income Tax on Capital Gains
If you decide to sell your property in Brazil, the income tax on capital gains in general and 15% for both Brazilians and foreigners .If bought the property on your behalf (and not on behalf of a company), there several benefits that you can enjoy when it is time to pay the tax, which may lower the rate to 5% or 6% of the profit.
1 – Owners who have only one property in Brazil, which is the sale of up to R $ 440,000 and have not made any alienation in the preceding 5 years are exempt from income tax on capital gains.
2 – Regardless of the date or amount of the sale, whether to reinvest the capital in real estate within 6 months, you can claim all or part of the tax paid in the previous sale, depending on whether the new investment and higher or lower than the previous sale.
3 – are also discounted on the capital gains tax 4% depreciation per year to own the property.
4 – Improvements made to the property can be deducted when calculating the tax on capital gains
I am thinking of buying Brazilian property, but why should I invest in the country?
Once you have visited and know Brazil well, this question may not be foremost in your mind. Having said this, putting your feelings about the country and culture itself aside for one moment, Brazil has seen progressive economical growth, in particular over the past decade, and people who decided to invest a few years ago are now seeing significant returns on their investment in the form of capital gain and ongoing rental yields. As an example, Brazil has seen stable increases on property prices of up to 25% per annum in some areas for a sustained period.
The all year round good climate in the North East of Brazil is also worth taking into account because you can visit your property at any time during the year and experience sunshine, meaning that rental yields in Brazil are also potentially high as a consequence.
The is of course the now certainty that Brazil will be hosting the next World Cup and Olympics. It has generally been found that host cities and the country as a whole will benefit as the worlds eyes focus on Brazil.
How do I purchase property in Brazil?
Once you have decided which property you want to buy in Brazil a verbal offer can be made through an estate agent for example, and often some negotiations will follow. Once the purchase terms are agreed, at this stage a lawyer should be appointed by you to formalise your final price agreement and to oversee purchase proceedings, including deposit or reservation payments to secure the deal for both the buyer and seller (generally 10%). With off-plan purchases, the price is however often fixed as the developer is already offering discounted prices at pre-launch stage.
The purchasing procedure in Brazil may vary slightly according to which developer or individual you are buying property from.
How does the property registration system work in Brazil?
The property registration system in Brazil is well developed and safe. The registration itself is carried out by private notary publics. All property is registered at one single registry in the particular area where you buy, which records details of the entire commercial history and the physical identification of each property. It is obviously very important to ensure that any property you buy in Brazil has a clear title. Access to registry information is available to the public and includes relevant details on ownership, mortgages and other pending debts.
Can foreigners buy property in Brazil and what rights do they have?
Yes, foreigners can buy and own property in Brazil. The Brazilian Government encourages overseas investment, and a foreigner has rights to own properties 100% freehold.
Can a foreigner buy and own farm land in Brazil?
Yes, a foreigner can buy and own farm land in Brazil assuming a foreigner does have a permanent visa in Brazil.
Can I invest in Brazil and buy property with my friends?
If you are thinking of investing in Brazilian real estate with your friends or business partners for example, this is no problem at all, as up to 10 individual names can appear on a title deed following a property purchase, meaning that fractional ownership can apply in this case, which in itself is a good idea to beat the global credit crunch in today’s financial market.
What are the associated costs with my property purchase in Brazil?
Costs to transfer property title in Brazil are the responsibility of the buyer and the fees can average between 3% and 10% of the purchase price. These costs may differ according to location and type of property that you buy (for example with beachfront property it generally costs you more). In addition, if it takes a significant amount of work to establish title and ownership, the costs could amount to more.
- A down-payment for your chosen property of usually about 10% of the purchase price is requested.
- Property title transfer/registration fees average about 5% of the purchase price, but this can vary depending on the type of property that you buy, and also the State in which you purchase.
- Payment for the property you are purchasing can often be secured with a deposit and thererafter in instalments of 12, 24, 36, 48, or even up to 84 months when buying off plan or a building in construction, but, interest rates are quite high, and generally not fixed via developer finance in Brazil. If you opt to pay in instalments, keep in mind there is also a currency risk: if the value of the Brazil ‘Real’ goes down and you are sending money from overseas, your property becomes cheaper, and vice versa if the ‘Real’ value increases.
- Payment for private sale/purchase agreements are often made all at once following initial 10% deposit, although short-term interest free finance payment contracts of up to 3 months can be made between the buyer and seller.
Is there a governing body of control for Brazil real estate agents?
Yes, Brazil’s estate agents/realtors are monitored carefully by a governing body known as CRECI, which stands for ‘Conselho Regional de Corretores de Imóveis’. Each qualified agent/realtor, or real estate business based in Brazil will be registered with CRECI and will be assigned a unique number which is lodged at the companies house.
Are mortgages available in Brazil?
The mortgage market is still underdeveloped in Brazil and as of yet foreign investors cannot obtain overseas mortgages in Brazil, unless resident in the country with a permanent visa and can satisfy bank or finance company approval criteria upon application. Overseas buyers at present usually arrange alternative finance in their own country of residence, although we do expect mortgages to become available for overseas buyers in the future as interest rates drop and as banks continue to develop their products.
Some constructors of new build and off-plan developments offer instalment plans covering periods of 12 to 84 months under financial terms. The charges applicable vary according to constructor and repayments are usually index linked (INCC).
How can a foreigner open a Brazilian bank account?
Bank accounts in Brazil can be opened by a foreigner if they have a permanent visa and buying a property doesn’t automatically entitle you to have a permanent visa, although this of course does not stop you from buying your property in Brazil as funds are sent direct from your bank account to the sellers bank account in Brazil using the usual route for international bank-to-bank transfers (SWIFT or CHAPS are examples of organisations that will be involved here).
If you have a permanent visa then you gain the benefit of being able to open a current/checking account (Conta Corrente) or deposit/savings account (Conta de Poupança). Current/checking accounts give all the usual benefits including cheque books and cash withdrawal cards which you use at ATM’s or for point of sale transactions in Brazil. Deposit or savings accounts in Brazil offer extremely favourable interest rates for your investment when comparing to other countries around the world.
Both ‘Conta Corrente’ and ‘Conta de Poupança’ are available to individuals (Pessoas Fisicas) with permanent visas, or for directors of a registered company in Brazil (Pessoas Juridicas).
If a Brazilian bank offers you the facility to open a bank account without a permanent visa, then please be warned, as this does not conform to current Brazilian banking laws.
What ongoing costs can I expect once I have purchased my property in Brazil?
This very much depends on what property you buy in Brazil, but as a guideline ongoing council taxes can be approximately 1% of the property value. Condominium payments for apartments vary depending on the type of building, but average between R$200 and R$750 per month. The minimum monthly wage in Brazil is approx. R$650 (approx. 323 US Dollars), so if you need workers to maintain your property for example then this can be a viable option.
Can I expect high rental yields for my holiday home in Brazil?
High rental yields can be achieved in Brazil based on good all year round weather conditions in the North East region for example. So, whether you have an apartment, rural property, or holiday home in Brazil, you can expect to see up to 30 weeks occupancy per year assuming your real estate investment is well located and close to amenities, therefore suiting a wide audience for the Brazilian holiday market. São Paulo and Rio de Janeiro are also good city examples which experience high rental yields through the holiday market and business sector demand.
Do I need a tourist visa if I decide to visit Brazil?
Most travellers visiting Brazil will receive a 90 day tourist visa on entering the country, although please note that USA citizens do need to apply before travelling to Brazil. You can apply for an additional 90 days on your tourist visa whilst in Brazil via the Federal Police station if you so wish.
I do not have the time to visit Brazil, so can I purchase properties without visiting the country personally?
We recommend that you always visit the country before investing.
What are the building costs in Brazil?
Brazil building costs range on average between R$600 to R$1,500 per square metre when you build property in Brazil, and the construction cost will be determined on the quality of materials used, amount of floor levels you intend to build with your development, the location of the site, and whether you require project management for the building phase itself.
How can I apply for my permanent visa in Brazil?
If you want to apply for a permanent residency visa for living in Brazil then you must satisfy one of the following conditions:
The administrator, manager or director of a professional or business corporation
The applicant must already be employed outside of Brazil by the parent company or by an affiliate or subsidiary of the company that proposes to employ him inside Brazil. Necessary documents for the first step will include:
Proof that the applicant is employed outside Brazil by the parent company, or an affiliate or subsidiary of the Brazilian hiring company;
Demonstrate that the Brazilian company is bringing in specialised labour that will transfer technology, increase productivity and/or bring social benefits;
Proof that the company outside of Brazil or its parent has effected total foreign-capital investments of at least US$ 200,000 in the employing company in Brazil for each visa requested.
Administrator, manager or director of a start-up company
Planned and recent start-up companies may apply for a maximum of three visas, essentially for the executives who will get the operation off the ground. The following conditions will apply:
Proof that the non-Brazilian company has been in business outside of Brazil for at least five years;
Power of attorney granted by the foreign investor to its new legal representatives for the purposes of setting up the company in Brazil;
A visa of this type will be issued initially for two years.
A foreigner who intends to remain in Brazil and will invest foreign funds in productive activities, so absorbing or training specialised labour. This category was planned for those foreigners who wish to invest funds (minimum equivalent of R$150,000 – one hundred and fifty thousand Brazilian Reais) in any kind of productive activity in Brazil. This kind of permanent visa is issued conditionally for five years.
A researcher or high level specialist
The applicant must supply:
A document from a Brazilian research institution manifesting its interest in the services of the researcher;
A curriculum vitae and appropriate academic references and diplomas.
A retired foreigner, over 50, who will transfer to Brazil the monthly equivalent of at least US$2,000. There is no limit to the number of dependents who may also receive permanent residence visas, but the main applicant must provide proof that they are genuine dependent relatives, as defined in Brazilian law.
The main applicant must prove he has a pension of at least US$ 2,000 a month. This will entitle him to visas for himself and two dependents. The applicant must demonstrate an additional US$ 1,000/month for each additional dependent, over and above the two already mentioned, and must supply, amongst other things:
A statement from the foreign agency responsible for paying his retirement pension, informing the total monthly sum;
A bank declaration authorizing monthly transfer of at least US$ 2,000.
Marriage to a Brazilian citizen
A permanent residence visa is granted to foreigners married to Brazilian citizens. Application is made to the Ministry of Justice (normally via regional Federal Police offices) or to a Brazilian Consulate abroad. Evidence (e.g. marriage certificate, statement from witnesses) should be presented of the matrimonial union. Immigration officials can make surprise visits to the couple’s home to make sure that the relationship exists.
Foreigner with Brazilian offspring
A permanent visa can be granted to the foreign parent of a Brazilian child. Application is made to the Ministry of Justice (normally via regional Federal Police offices) or to a Brazilian Consulate abroad. The offspring should be economically dependent on the foreign mother or father.
I am going to live in Brazil and want to bring my family pets with me, so how can I achieve this?
If you are thinking of living in Brazil permanently, then you can bring your dog, cat, or birds with you and your family. You will have to present a health certificate issued by a local veterinarian in your home country and then approach the Brazilian Consulate to get the certificate endorsed. The timing of you obtaining this endorsed certificate and you travelling to Brazil needs to be carefully considered, as the certificate is only valid for a 10 day period from when it was endorsed. The only remaining responsibility will be to contact the flight company to arrange suitable transport for your family pets, and ensure that the transport waiting for you at the airport in Brazil is suitable for transporting your pets safely to their final destination. Please note that charter flight operators into Brazil can charge a lot of money for transporting your pets, although options such as TAP Air Portugal who fly from Europe into Brazil offer better prices for pets.