Buying properties in Brazil
With good prospects both in urban and rural areas, it’s not surprising that foreign investors get interested in acquiring properties in Brazil. In this article we will give information about the procedures to be taken by foreigners that are willing to buy rural or urban properties in the country.
The construction boom in Brazil becomes the main novelty in the real estate world and the country is to rise as the second most attractive place for foreign investors, surpassing China and Europe. A survey published in January 2012 by the Association of Foreign Investors in Real Estate (Afire, in the English acronym), ranked São Paulo as the fourth most attractive city for investments in real estate, only after Washington, London, and New York.
Moreover, the abundance of fertile unoccupied lands and competitive prices when compared to other countries attract investors from all over the world to purchasing Brazilian agricultural lands.
Buying a property in Brazil is a relatively secure investment, as the country has a safe and organized property registration system and a well-developed real estate market. However, there are some precautions and provisions to be taken so the deal can run smoothly.
But first of all, it’s important to clarify that, before the national law, any foreign citizen can acquire an urban property inside the Brazilian territory. But when it comes to rural areas, there are some limitations that we will discuss in the end of this article. First, we will concentrate on general procedures that apply to the purchase of rural and urban properties.
The Importance of having some legal advice
For a foreigner to buy a property in Brazil it’s necessary to obtain reliable legal assistance, especially if he does not speak Portuguese and knows nothing about the Brazilian laws. It’s quite common to see foreigners being defrauded by unscrupulous sellers or realtors in Brazil.
Legally, Brazilian lawyers must be registered at OAB (Brazilian Bar Association) and realtors must be registered at CRECI (Regional Council for Real Estate Brokers). This information can be consulted online. Both institutions are regional, meaning that their administrations are divided in states.
Once you have the lawyer’s name, CPF or OAB number you can access the website of the OAB where the professional is registered, and look for “Consulta de Inscritos” where you will be able to check if his registration is okay. This is the page where you can consult the lawyers registered in the OAB from São Paulo state.
As for the realtors’ registration it’s almost the same process of consulting as the lawyers. This is the page where you can check the brokers registered in CRECI from São Paulo state.
Tip: You can Google “Consulta de Inscritos OAB-SP”, or other acronyms of the Brazilian states and Federal District, such as OAB-RS, OAB-RJ, OAB-BA) and the consulting page will probably appear in the number one spot. Repeat the same process for CRECI.
During the process of acquiring a property in Brazil the lawyer and the realtor will verify if:
- The real estate is properly regularized with the government bodies
- The seller really owns the property that he is selling
- The seller is allowed to sell this property (if there’s taxes to be collected, authorizations from the spouse or other owners to be signed etc)
- There property is not on mortgage or have any onus
- The contract of the deal is okay
The professionals acting on your behalf will also give support on the process of payment and transfer of funds, monitor the transference of the real estate to its new owner’s name.
Normally, legal advice professionals charge around 1% or 2% of the purchasing value of the property for their services. Have in mind that being registered in their Professional Councils doesn't make lawyers and brokers blindly trustworthy. It’s important to get some references with other people too.
Documents required: the Brazilian CPF
For a foreigner to buy a property in Brazil, he must issue the Brazilian Taxpayer Card, known as CPF. This document will identify the foreigner before the Federal Revenue Service and will be used in all the financial transactions. Click here to find out how to issue this document. The other documents that will be requested foreigners probably already possess, such as the passport and other personal documents. Foreigners buying rural properties must also present the RNE, to prove their residence in the country (see the final topic of this article)
In order to produce legal effect in Brazil, foreign documents need to pass through:
1) Consular legalization by a Brazilian diplomatic office located abroad and payment of the fees required
2) Sworn translation into Portuguese
3) Registration at the national Public Registry of Deeds and Documents
Know more about this process here.
Taxes and fees involved in the process
As you may know, to buy a property, you will not only spend with the value the seller imposes, but also with several administrative fees to transfer the property to your name. And in Brazil those fees and taxes are really high. The calculation basis is always the value that is written in the contract that governs the transaction. In some cases, the seller already includes these values in the property’s final price.
- ITBI (Property Transfer Tax): this tax is collected at a rate of 2% of the declared value of the transaction and must be paid to the municipality. For example, if you buy a property for BRL 500.000 in Brazil, you will have to destine BRL 10.000 to the municipality and so on.
- Escritura Pública de Compra e Venda (Deed of Sale): 1% a 1.5% of the declared value of the transaction to be paid to the registry where this document was carried.
- Registro do Imóvel: 2% of the declared value of the transaction to be paid to the local Cartório de Registro de Imóveis (Real Estate Registry).
- IPTU (Municipal Property Tax): this is a tax collected annually by all people that possess an urban real estate. The rates are normally 0.6% the value of the property, varying from municipality to municipality. It can be paid in up to 10 installments in the course of the year. When the property is rented, it is a common practice to transfer the IPTU to the tenant.
- Laudêmio: some beachfront properties are subject to pay a fee to the Secretaria do Patrimônio da União (Registry of the Federal Heritage). The rates range from 2% to 5% of the declared value of the transaction.
About the payment and transference of funds
Normally, the seller will ask the interested buyer an advance payment of 10% up to 30% of the property’s final price. This advancement is called “sinal” in Portuguese and guarantees that the seller won’t sell the property to another buyer. After the sinal is paid, the process of transference can be conducted.
In order to buy a property in Brazil when the buyer is not in the country, it is imperative that the funds are sent directly from the buyer’s account to the seller’s account in Brazil. This way the transfer will be registered with the Central Bank of Brazil.
The transfer will be carried at the exchange rate of the day the money is released to the seller (usually after five days) and some fees will be charged for this operation. For the money to be released, the seller must present the contract of sale and proves the change of ownership. At that time, it might be important to have an expert lawyer by guarantee.
This procedure allows the government to register your investments in Brazil and guarantees that no problems will appear at the time of transferring the money out of the country, if one day you decide to sell the property. In general, there are no restrictions on the withdrawal of funds from Brazil, where these have been registered with the Central Bank at the time of acquisition.
Acquisition and use of rural property by foreigners
Article 190: “The law shall regulate and LIMIT the purchase or lease of rural property by a foreign person or entity and establish the cases that depend on congressional authorization”. (Federal Constitution)
When it comes to the acquisition of rural lands by foreigners the laws differentiate the process for individuals and legal entities. There are a lot of regulations and restrictions imposed to foreigners. Such legislation is justified to defend the integrity of the national territory and the State security. Because it is directly linked to national security, food and energy, there are a lot of regulations and restrictions imposed to foreigners.
Such legislation is justified to defend the integrity of the national territory and the State security. According to INCRA (National Institute for Agrarian Reform), around 0.51% of the Brazilian territory is in the hands of foreigners, divided in 34.371 rural properties or 4.3 million of hectares. However, these numbers are challenged for several national institutions that allege the foreign participation in the ownership of Brazilian lands is much higher, especially in some Amazon states (Amazonas, Pará and Mato Grosso).
Rural property acquired by foreign individual
Only foreigners with residence regularized in Brazil can acquire rural property. The law does not speak in permanent or temporary, only proof of residence in the country. So foreigner that does not live in Brazil simply cannot buy rural properties in the country.
As for foreigners that live in the country, they can normally acquire a rural property in Brazil, since they obey the following requisites:
- The acquisition of more than 1 property will only be allowed if authorized by INCRA (National Institute for Agrarian Reform)
- Does not exceed the percentage limits of land to foreigner’s properties in the Brazilian cities. The foreign ownership is limited to 25% of the rural municipality area or 10% of the rural municipality area held in the hands of a single country.
- The area to be purchased is not located in a border area
Rural property acquired by foreign legal entities
The foreign legal entities authorized to operate in Brazil can only acquire rural properties if they develop agricultural projects in the country, industrial livestock or colonization and such projects must be previously approved by the Ministry of Agriculture or the Ministry of Industry and Trade depending on the matter.
As for the limits of area imposed, the foreign legal entity may only acquire rural property if the area does not exceed 1/4 of the surface where the municipality is located, or, if it comes to legal persons of the same nationality, may not own more than 40% (forty percent) of a maximum of 1/4 of the surface in each municipality.