Buying Property in Brazil : Costs

Daniela Quiros,  Saturday, 4 January 2014

 

This article is part of a series of 8 articles about buying property in Brazil. The other articles in the series cover the following topics:


The Cost Of Buying A Property In Brazil

Once the selection process is over, and you have made your choice, the buying process is quite similar to that operating in most of the European countries, mainly because Brazilian law is based on the Portuguese to a certain extent. Your legal representative will steer the buying process, check the property title, and proceed with other you diligence, such as permissions, survey plan, and the like. The buyer has two formally obtain a tax identification card, CPF, which will ensure his legal identity in Brazil. You can also delegate you lawyer to act on your behalf when obtaining a CPF for you.

Understanding the System

Understanding the taxes, mortgage costs and fees involved in property acquisition in Brazil is crucial for a successful title transfer. Closing costs usually amount to about 4% of the property’s price tag, excluding the legal fees and title insurance.

Foreigners and nonresidents have the right to buy land and real estate in urban and rural areas via direct ownership from abroad, or by establishing resident companies and partnerships. The restrictions are very few and apply mostly to rural properties. A foreigner having an intention to migrate to Brazil does have the right to buy rural property directly if he comes to live in this country within the next three years of the acquisition date.

Title transfer registration system in Brazil is well-developed and quite safe, and every property is only registered in a single local registry. This registry keeps the entire commercial history of the property, its physical identification, all relevant information about its owners, mortgages, liens and other burdens. The registry is publicly accessible, and the relevant information is as transparent as it should be. In many big cities, the verification of the property's status is automated.

Who usually pays purchase and sale related taxes and fees when closing a deal in Brazil?

Unless stipulated otherwise, the cost of drawing and registering the deed, title transfer, and the required clearance certificates is covered by the buyer.

Legal fees

In Brazil, there is no set schedule on property transaction legal fees, so we can talk about the pattern in the market. Legal fees usually include 1% of the property value; however, the percentage can be higher or lower depending on the region, as well as the amount of the deal. For example, if the amount is below $1 million or above $50 million, the legal fees will be calculated according to a personalized schedule. There are also other criteria that influence the amount of the legal fees, such as the minimum fee imposed by the Brazilian Bar Association, but the minimum fee varies largely from state to state.

Brokerage Fees

The buyer and the seller can enter into the sale directly, or with the help of an intermediary. A real estate agent or agency must be duly accredited. The agency or the agent usually charges a remuneration through commissions, which is determined by the Real Estate Agents Regional Council, CRECI, and is different in each region. The registration procedure usually takes about two months to complete.

Fees and taxes

The fees and taxes that must be paid by the seller include:

  • Property brokerage fees that usually include 5% of the market price of the property; the percentage may vary depending on the region and conditions of the agreement between the seller and the broker.
  • The seller also covers urban and rural real estate brokerage fees which may be anything from 5 to 10% of the total value of the property.
  • Property fees for real estate that is under construction, these can be anything from 5 to 8%.
The transfer related costs are usually on the buyer, and include:

  • ITBI, Imposto de Transmissao de Bens Imoveis. This is a transfer tax that applies to title transfers on real estate and the rights to real estate; the municipality charges this tax. Again, the amount of transfer tax varies from city to the city so we can talk about the average cost which is 3% of the market value of the real estate in question, but the amount can be higher. The buyer or his legal representative pay the transfer tax to the local City Hall, Prefeitura.
  • ITCMD, Imposto Sobre Transmissao Causa Mortis e Doacao. This is the state tax which applies to transfer of any boots on donations of real estate or death related inventories. The amount also varies depending on the region, but the average cost is 4% of the market value of the real estate question, but also can be higher. The buyer, or his legal representative, pays this tax to the City Hall, Prefeitura.
Closing costs

Costs of registering the deed and executing it are paid to the Real Estate Registration Notary's Office, and usually are between $300-$400 on real estate with the market value of $44,000 and higher.

Navy alienation fee

The federal government charges this fee for transactions that involve property located directly on the coastline, or within 18 meters from the coastline. The Navy alienation fee usually amounts to 5% of the total property value.

Municipal alienation fee

In some regions, City Hall also charge alienation fees for property in specific municipal zones. The average municipal alienation fee is 2% of the total market value of the property.

Bank fees

If the property acquisition involves bank financing, the buyer must also take into account fees related to the financial institution involvement. For example, property evaluation taxes, real estate insurance, life insurance, administration taxes, credit opening taxes. The amounts differ depending on the financial institution and the region.

Item Fee Who pays
Transfer Tax 2-4% buyer
Notary Fees 1.25% buyer
Registration costs 0.75% buyer
Legal Fees 2% buyer
Laudemium, Navy Alienation Fee 5% buyer
Real Estate Agency Commission 3-6% seller
Capital Gains Tax 15% seller
Total Costs Paid by Buyer 6-8%
Total Costs Paid by Seller 3-6%+capital gains tax


Round-trip transaction costs can be anywhere between 9 to 14% and include all costs related to buying and reselling the property in Brazil, such as notary’s fees, lawyer’s fees, taxes, agencies, registration fees.

Capital gains tax can amount to 15%, and it must be paid at the time of the sale. The Brazilian law allows the reinvestment of the gain into another property, and deferral of the tax.

As a rule, condo fees are inexpensive, for example, for a typical condo with a swimming pool and basic amenities, the fee is less than $80 per month.

vary depending on the region, but beachfront condos usually cost around $250 in property taxes per year.

Money transfers from abroad to Brazil

To have a bank account in the Brazilian bank, a foreign person must present his CPF, or tax identification card, passport, a permanent visa and proof of residence in Brazil. There are two approaches to transferring money from abroad to Brazil:

    If you already have an account in the Brazilian bank, you can request the money transfer from the source bank by simply providing your bank’s name, number, agency, account number, Swift code (the bank's international code);
  1. If you do not have an account with a Brazilian bank, you can only transfer about $5000 to withdraw in cash. However, a Private Instrument or a Deed of Purchase-Sale can justify the request to transfer any amount to a third-party domestic bank in Brazil. The Central Bank of Brazil controls all transactions in the country, and it's the Central Bank that will require justification of the amount to be released.
It should be noted that the down-payment for the property of your choice is usually about 10% of the total amount. The deposit usually secures the purchase, and you can negotiate the further payment in installments of 12, 24, 36, 48, and up to 84 months when you buy an off- plan or a building under construction. Be advised, however, that the interest rates are quite high, and the worst part is that the interest rates are not fixed even if you buy via . If paying in installments is your choice, you should also keep in mind that this method involves currency risk if the Brazilian ‘Real’ undergoes inflation and your property becomes cheaper, or vice versa.

Payment for a direct private purchase-sale is often made in a single payment that follows the initial 10% down-payment. However, it is often the case that the buyer and the seller negotiate on the short-term finance payment of up to three months that does not trigger any fees.


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