Brazil property costs and legal fees
Essentially, there are two different sets of costs you will incur
both during and after you have completed on your Brazil real estate
These are the front end costs such as your solicitor fee and the back end costs which will include annual land or property
taxes and management fees etc., You should be fully aware of roughly how much your Brazilian property investment or your home in Brazil purchase is likely to cost you.
While nearly all of these costs are unavoidable, in some instances you can reduce your buying costs in a few ways. The first obvious way
is to negotiate hard on the asking price with a view to getting a good reduction. The second is to assume responsibility for some of the things your solicitor can do on your behalf but will charge you a hefty fee for doing so.
The amount of lawyer fees will be determined by the various add-on
services that are provided under legal representation. For instance,
using and escrow account facility or having your lawyer apply for your CPF tax identification number rather than doing this yourself, will add to the overall solicitor fee charged. That said, the following is only an indication of the upfront costs you will likely incur.
Upfront Brazil property costs and legal fees
You will firstly need to think about how you are going to fund your
Brasil property purchase. Since there is currently no Brazilian mortgage or finance facility available, you must decide whether you are going to remortgage a property in your home country to obtain the finance you need or alternatively, obtain a mortgage in one of the European countries etc.,
Any mortgage or remortgage finance costs, including broker fees
and valuation fees will need to be factored into your upfront costs as well as in the backend.
It is common practice for some lawyers to request prepaid legal fees - that is, requesting you pay an estimated legal fee upfront, before
they start representing you. While a prepaid legal fees request is quite in order, be sure your solicitor is from a reputable,
English-speaking law firm.
You can expect transaction costs, fees and taxes to amount to roughly seven to eight percent of your purchase price. This figure will typically include stamp duty, notary fees and the
registering of the property in your name etc.,
However do bear in mind that the overall Brazil property buying costs will largely depend on the northeast region or state in which you buy your property, as well as location. There is a lot of detailed work involved in buying property in Brazil and lawyer fees in addition
to taxes will reflect this fact.
All Brazil real estate agency costs are paid by the vendor, not the
seller and will typically be in the region of six percent. All transactions are carried out in Reais - Brazilian currency.
Backend Brazil property costs
Once you have acquired your property in Brazil, you will be required to pay an annual real estate land or property tax of between 0.5 to 2 percent of the estimated value of the property. This figure is a rough estimate determined by the authorities but in
many cases, it is usually lower than the actual value of the property.
You might also be expected to pay an additional tax - taxa de
terrenos de marinha, which applies in specific areas such as
marinas or some developments that are close to rivers or the sea. Although this form of taxation is not commonplace, you should check before buying your dream property in Brazil since this additional cost will set you back approximately 5 percent of your Brazil property value.
Depending on the location and the purpose for which you have bought
your Brasil property, you will need to budget for maintenance and
running costs. If your purchase is for a home in Brazil which is strictly for your exclusive use, then you might need to employ a local person to carry out caretaking and maintenance duties when you are not using the property.
If your purchase is strictly a Brazil property investment, note that once you have obtained your CPF tax identification number, you will become liable to pay tax on any rental income you receive.
As well as receiving rental income, you will also have to pay a percentage of that income on rental management and maintenance fees. This can work out to 40-50% of rental income, however these expenses are tax deductable.
Should you sell your Brazil property investment and repatriate the
funds within 5 years of buying it, you will be subject to capital gains tax of around 15-27 per cent. This figure is arrived at by calculating the difference between the registered buying price and the agreed selling price, less any relevant deductions for expenses such as maintenance fees etc,.
However, if you sell your property in Brasil and reinvest all the proceeds back in Brazil, you will not be subject to capital gains
tax within the 5 year period. After 5 years of holding your property in Brasil, you are free to repatriate your funds tax-free.
Do note that the capital gains taxation in Brazil can change in the
future and you must seek independent legal advice on capital gains taxation on any Brazil property you buy.
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