Property
Richard Surrey
Sep 12 2008

Rental Income

The Brazilian tax system encompasses the following tax categories: federal taxes, state taxes and municipal taxes.

Income Tax (Imposto de Renda de Pessoa Fisica). Brazilian income tax is a federal tax, levied on income and proceeds of any nature received by individuals or corporations. Non-Resident taxpayers are only subject to tax on their Brazilian-source income. From 1 January 1999, nonresidents are taxed at a flat rate of 25% on their gross income, without any deductions.

Real Estate Tax (Imposto sobre a Propriedade Predial e Territorial Urbana or IPTU)

A municipal tax, property taxes are imposed on the market value of the real estate. The tax rates vary from one municipality to the other. Typical rates are around 0.5% to 4% of the property value, as assessed by the municipality, an assessment usually lower than market value.

Rural Property Tax (Imposto sobre a Propriedade Territorial Rural or ITR)

Rural property tax levied on the land located outside the urban zones of the municipality. Unlike the IPTU, this is a federal tax. The tax rates vary from 0.03 to 20% depending on the number of hectares of land and the ratio which the utilized area bears to the total land area.

Capital Gains Tax

Capital gains realized by individuals on a sale of real property, are subject to Brazilian tax at a rate of 15%. The taxable gain is computed by deducting the acquisition costs from the gross selling price.

Capital gains earned by nonresidents who reside in countries that do not tax the relevant income or whose income tax rate is less than 20% are taxed in Brazil at a special rate. As of January 2004, capital gains earned by these individuals are subject to a withholding tax rate of 25%.

However, gains are tax-exempt if you have owned the real estate for 20 or more years, or if the real estate is the sole estate you own, and you have owned it for at least 5 years and the sale price is not over, approximately, BRL582,750 (US$259,000).