Non-residents are taxed in Brazil on income arising from Brazilian sources only and are liable to a number of other property related taxes outlined below. An individual is considered resident in Brazil if s/he spends 183 days or more in any tax year (calendar year), consecutives or not. Non-residents may also be liable for tax on the same source of income in their home country of residence, where taxes are levied on worldwide income. There is no Double Taxation Agreement between Ireland and Brazil at present. This will impact the tax implications on income received from Brazilian Property. There are double taxation agreements with Brazil and France, Germany, Hungary, Portugal, Spain.
Tax Identification Number
Non-resident who has assets or rights subject to public registration in Brazil, inclusive properties, vehicles, bank account, investment in financial market, investment in capital market are obliged to register for a CPF (Personal Tax ID Number). When a Brazilian company is set up, a CNPJ (Corporate Tax ID Number) should be request.
Taxes payable when purchasing a property are as follows:
Transfer Tax on purchase (ITBI) Upon the Notary verification of the property purchase deal you will be required to pay transfer fee @ 2% of property market value attributed by City Hall (Prefeitura). There is no VAT equivalent in Brazil. If Brazil was to substitute its taxes for the VAT version it would get rid off many major taxes such as: COFINS, PIS, IPI, ICMS, ISS and even ITBI. There is little discussion in Brazil about substituting those taxes for VAT. Even if that come to happen it won't be in a near future.
Ongoing taxes payable in Brazil on property are as follows:
Local Property taxes (IPTU) is paid once a year and its value is based on the property market value which is evaluated accordingly to laws established by Municipal Chamber. Thus, the criteria can differ from one municipality to another. It varies from 0.6% to 2%. Waste Collection fee (TCRS) applies in Brazil. It has a complicated formula that takes in consideration localization, type of property and its size. Thus, it is calculated by multiplying Reference Unit Value (VUR), Localization Factor (Floc) and Size Factor (Fporte): TCRS = VUR x Floc x Fporte.
Personal Income Tax on rents for a non-resident is subject to 15% tax on rents up to - 12,000; over that value a 27.5% rate applies. Tax is payable after allowable deductions for expenses incurred in connection with letting the property. Deductible items include: local taxes, maintenance fee.Personal Income tax form must be submitted by 30th April - any balance of tax payable must be paid within 30 days of a notice of assessment being received.
Corporate Income Tax is payable if property is purchased through a company and is calculated @ 15% on the company profits. All deductions will be allowed for costs incurred since receipts are kept and informed on the ledger. The Corporate Income tax form must be submitted by 30th March - any balance of tax payable must be paid within 30 days of a notice of assessment being received. Even if you do not receive income in Brazil you still have an obligation to file an Annual Tax Return in Brazil.
Other applicable taxes are as follows:
Capital Gains Tax is payable on any increase in value since acquisition @ 15%. The gain is calculated on the difference between the sale price and the higher of the tax estimation and the price of acquisition (Notary Deeds), corrected by an inflation index.
Inheritance Tax is payable by non-resident beneficiaries on certain transferred assets Donations and Inheritances are charged at a rate of 2.5% or 4% depending on the donation or inheritance value.
Worldwide income
If you are an Irish resident you are obliged to declare and file your Brazilian income in Ireland. There is currently no double taxation agreement in place between Brazil and Ireland so double taxation relief will not apply but in the case of UK residents there is an agreement in place so full double taxation relief is allowed. Please contact us for further details regarding double taxation relief and/or filing your Irish/ UK Tax Return.
Property Tax International can organise the completion and filing of your Brazilian tax returns in addition to advising on your property tax obligations in your home country.
The information provided here is intended as a guide only. While Property Tax International Limited makes every effort to ensure that the information contained herein is accurate, we take no responsibility or liability for any inaccurate, delayed or incomplete information, nor for any actions taken in reliance thereon.
Property Tax International Ltd is part of The Taxback Group incorporating Taxback International and Taxback.com, which have been providing international tax advice since 1996
