In total, fees and taxes come in at around seven per cent of the purchase price. This is broken down into legal fees of two per cent, stamp duty of two to three per cent (depending on the price of the property) and registration fees of two per cent. Estate agents fees of up to six per cent are paid by the vendor.
Once you have obtained your CPF number, you will automatically become liable for income tax if you rent your property out – this operates on a sliding scale of 15 to 27.5 per cent.
When you come to sell your Brazilian home, you will need to pay capital gains tax – again this works on a sliding scale of 15 to 27.5 per cent. This is calculated on the difference between the final selling price and the registered buying price – less any maintenance fees and travel costs. Be aware that the registered buying price is set by City Hall, and therefore may not be a true reflection on what you actually paid. However, if you are planning on reinvesting the profit back into a Brazilian property, then you will generally be exempt from CGT.
Legal issues
Brazil is perhaps one of the few emerging markets that allows foreign buyers to own both land and property in their own names on a 100 per cent freehold basis – making the buying process relatively straightforward. However, before you can buy a property in Brazil, you must obtain a CPF (Cadastro das Pessoas Físicas) number, which can be acquired via the Brazilian embassy in the UK for a small fee (around £10). Once issued, this tax registration number will enable you to open a bank account and apply for utilities, although, perhaps its main aim is to register the amount of capital that you are planning on bringing into Brazil. It also allows you to repatriate your funds should you decide to sell your property.
If you are buying a home that was built after 1973 it will come with a legal document know as a Matrícula. Similar to title deeds, this document lists a detailed property description, all previous owners, the boundary details, any outstanding debts and all legal, financial and judicial transactions relating to the property.
The buying process
The purchase process in Brazil is relatively simple once you have obtained your CPF number, however it is crucial that you seek the advice of a good, independent lawyer. This is especially true if you are buying a resale home, as checking for clean title can be a complicated and painstaking process.
Once all of the relevant searches have taken place you will need to open a local bank account, as the purchase funds must be visibly traceable from the buyer’s bank account into the vendor’s. In addition, all monetary transactions will need to be registered as a foreign investment with the bank of Brazil, but this cost should be covered in your legal fees.
You will be required to pay a deposit of around ten per cent when you have had your offer accepted – although this figure can range from five to 20 per cent. The balance is paid on completion, and the entire process is overseen by a notary.
Even though all contracts are processed in both Portuguese and English, it is advisable to hire a translator if your solicitor isn’t fluent in both languages.
Finance
Currently it isn’t possible to get a Brazilian mortgage, therefore the most common way to raise finance is to remortgage a UK property in order to release equity.
