In Brazil the potential for products that originate from farms is very high. The country has the second largest cattle herd in the world, and is the second biggest exporter of beef. There is also a high demand for dairy products - supplied by imports - and for leather. Besides this Brazil is the leading producer and exporter of coffee, sugar, orange juice and ethanol from cane sugar.
In this article, we will look at the procedures and documentation that are needed to buy a farm in Brazil.
Precautions before purchase
The rules for buying a farm in Brazil differ little from buying urban real estate in any city in Brazil. However, some specific precautions are to be taken before purchasing rural real estate.
Brazilian law obliges owners of rural land to georeference their land, measuring it by means of GPS technology, solving permanently any possible land disputes. This measure aims to regularize the accounting of all rural properties in the Country. If it has not been done on the land to be purchased, the purchaser should hire a cartographic engineer and then submit the results to the INCRA, the National Institute for Agrarian Reform.
As basic infrastructures in Brazil are precarious outside big cities, it is also advised to scan the surrounding areas of the farm. Check if the roads leading to the farm are in good condition, if there are any medical facilities nearby in case of emergency, if the mobile signal is strong, if there is any electricity, etc. It is also wise to check whether or not there is a water supply on the land.
As the productivity of the grounds of the property may decrease over the time of use, it is recommended that you have a sample of the soil analyzed by a laboratory and then have an agronomist break down the results. This is to be done if the farm is intended for agricultural purposes.
It is also advisable to check that the land is not occupied by third parties, like trespassers or other farmers. If that is the case, the owner must issue a Ação de Imissão de Posse, Portuguese for Writ of Entry. It may also be possible that the owner must compensate the people he dispossessed.
Purchasing a farm
Documents to be provided by the purchaser
- Notarized photocopy of:
- Identification Document
- Birth certificate and marriage certificate - for those who are married
Documents to be provided by the seller when he is an individual
- Clearance certificate from:
- Notary office
- Federal Justice
- Receita Federal
- Labor Justice
- Municipal Authority
- Notarized photocopy of:
- Identification Document
- Proof of Residence
- Birth certificate and/or marriage certificate, for those who are married
- Certificate of Registration of Rural Property, the CCIR, which shall include:
- SNCR code, identifying the property with INCRA
- Name of the owner
- Name of the property
- Number of “Módulos rurais”, a measuring unit that comprises size, location and economic use of the property in its definition. The size of the “Módulo rural” may vary according to the location
- Number of “Módulos fiscais”, a measuring unit that comprises the predominant type of farming in the municipality, the income from the predominant farming and the concept of family property. The size of the “Módulo fiscal” may vary according to the location
- Total area of the property
- CCIR Number
- The last five Statements of Tax on Rural Property, the DITR
- Environmental Permit - for economic activities in the area
The notary office must also issue a certificate regarding encumbrances on the property.
Documents to be provided by the seller when he is a legal entity
- CNPJ Number
- Articles of association
- RG, CPF, proof of residence and profession of the director, partner or attorney who will sign the title deed
- Certified Photocopy of:
- Tax Debts Certificate, from the Receita Federal
- Social Securities Contributions Clearance, by the INSS
- Certificate by the Board of Trade attesting that there are no other alterations
- All other documents relating to the property that are required by the individual
Definition of rural real estate as a farm
A farm is defined as a rural property where the practices of agriculture or ranching are carried out. As Brazilian Law states, the choice of the economic use of a rural property is up to the owner.
That being said, rural real estate is defined as a farm according to the intentions of its owner. But, as with any rural property, a farm must be inscribed in the Sistema Nacional de Cadastro Rural or SNCR, the National System for Rural Registration. The SNCR is a database managed by INCRA.
The SNCR is an essential tool for the management of the agrarian structure of the country amassing information about every one of the 6 million plus rural properties in Brazil, as well as information about its owners or holders.
SNCR information is used to classify rural properties as small, medium and large as well as to monitor the use and ownership of the rural property, controlling the acquisition of land by foreigners, in addition to fighting land grabbing and slave-like labour in Brazil.
Registering the real estate
Real estates are registered in Brazil via notary offices, extrajudicial private entities that are managed by the government. The real estate registry in Brazil is such that each property can only be registered at one notary office which stores the entire transaction history and physical identification of each real estate.
Land registry and transfer costs, for real estate transactions in Brazil can vary depending on the State the property is purchased in.
The costs are as follows:
- Registration fee is around 2% of the transaction value
- Real Estate Transfer Tax, ITBI, of approx 3% of the transaction value
Restrictions to foreigners
When it comes to the acquisition of rural land by foreigners the laws differentiate the process for individuals and legal entities. There are some regulations and restrictions imposed on foreigners. Such restrictions are justified to defend the integrity of the national territory and State security.
The acquirement of rural property in Brazil is forbidden for foreigners who are not residing in Brazil, the only exception being the case of inheritance where the foreigner is the legitimate heir to the person owning the rural property. Furthermore, land owned by foreigners can not exceed 25% of the area of the municipality where they are located.
In August 2010, Brazil’s attorney general issued a re-interpretation of the 1971 law that would limit sales of farmland to foreigners to 50 modules, something roughly equal to 5,000 hectares or 12,000 acres.