Tax Implications of Being a Landlord in Brazil
Many taxes related to real estate are the responsibility of the property owner, some of whom might be able to deduct expenses for tax purposes. This article covers these cases and the obligations of landlords in Brazil.
Brazilian legislation that covers rented properties was originally published in 1991, but changes made after 2010 clarified this situation for landlords and tenants. This law defines, among other topics, the tax obligations of each party in a property rental situation.
According to this law, it is the responsibility of the landlord to pay:
- Administration taxes, including the condo fee — taxa de condomínio — when the property is an apartment
- Insurance against fires
- Extraordinary expenses, related to maintenance of the building or common areas
- Reserve fund, where money from the occupants is accumulated for situations that might arise
The payment of these, and any other duties, might be transferred to the renter if both tenant and landlord agree, and also if this is included in the rental contract.
Often, renter and tenant argue about the payment of the Property Tax for Urban Land - Imposto sobre a Propriedade Predial e Territorial Urbana (IPTU). Brazilian law clearly states that this tax is the responsibility of the landlord, who is liable if it is not paid.
It is possible, though, if both parties agree, to include a clause in the rental contract that this tax will be paid by the renter. In any other cases, however, IPTU must be paid by the landlord.
Taxes Paid by Renters
It is never enough to remember that any ordinary taxes, such as the utilities charged monthly due to personal consumption must be paid by the renter. This category includes water and electricity bills.
Some of the duties paid by landlords in Brazil might be later deducted from other expenses. The major deduction is from Income Tax - Imposto de Renda (IR).
All the rental received must be declared on the IR form, even though the amount might not be large enough to be taxed.
When declaring income obtained from rental, there are two possibilities:
Rent Paid by a Legal Entity
If the property is rented by a company, the landlord has a small number of obligations, since the company is responsible for collecting this tax. The owner only has to complete the tenant’s details and the correct information on the IR form.
Rent paid by Individual
If the property is rented by an individual, and if the landlord is responsible for paying taxes like IPTU and condo fees, for example, a deduction might be possible. Expenses with brokers and other administrative bodies might also be deducted. In this case, the amount spent on taxes by the landlord must be recorded in the required field while completing the IR form.