Brazil: Overview

RENTAL YIELDS

Yields in Brazil major city-centres are high

A 50 sq. m. apartment in Sao Paolo can be expected to yield 9.6% per annum. Larger sized units generally have lower yields, from 5.4% to 7.2%. Yields for apartments in the suburbs of Sao Paolo are between 4% and 8%.

Properties in Rio de Jainero are a bit more expensive than in Sao Paolo, but they also fetch higher rents and return higher yields; from 7.5% to 9.6%.

Yields for apartments in other cities such as Fortaleza, Bahia and Brasilia are around 4% to 7%. Smaller units generally have higher yields.

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TAXES AND COSTS

Rental income tax is high in Brazil

Rental Income: Brazilian income tax (Imposto de Renda de Pessoa Fisica) is a federal tax, levied on gross income of nonresidents at a flat rate of 15%, without any deductions.

Rental income earned by non-residents who reside in low-tax territories are taxed in Brazil at a special rate of 25%.

Capital Gains: Capital gains realized by individuals on the sale of real property are subject to Brazilian tax at a rate of 15%.

Inheritance: In Sao Paulo, inheritance and gift taxes are imposed at progressive rates 2.5% to 4% depending on the value of the inheritance.

Residents: Residents are taxed on their worldwide income. Income tax is levied at progressive rates depending on the taxable income.

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BUYING GUIDE

Total transaction costs are moderate in Brazil

Total roundtrip transaction costs, i.e., the amount it costs to buy and sell a property, amount to between 11% and 12% of the value of the property.

The real estate agents' fee is usually 6%. Registation fees amount to around 2% of the property's value.

Registration requires no less than 14 separate procedures. The process can be completed in about 47 days.

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LANDLORD AND TENANT

Brazil's landlord and tenant law is pro-landlord

Rents: The initial value of the rent can be freely agreed between the landlord and the tenant under Law 8.245/91, known as Lei do Inquilinato.

The landlord is generally protected by a guarantor i.e., a third person responsible for paying any unpaid rental debts of the tenant.

Tenant Eviction: Evicting non-paying tenants can be difficult, as the courts tend to be saturated. The duration of eviction suits varies by State.

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ECONOMIC GROWTH

Brazil’s highly unequal economy

Brazil is the largest country in South America. It is home to 188 million people, and highly ethnically diverse. Roughly two-thirds of the population lives on or near the coast.

Brazil underwent a cycle of economic booms and busts after the 1992 debt crisis. The country is highly vulnerable to the world prices of commodities such as coffee. The 2004 GDP growth rate was 4.9%, but fell to just 0.5% in 2003. The estimated GDP per capita growth rate from 2006 to 2007 is 2.55%, with a GDP per capita of US$5,518 for 2007.

Almost one-third of Brazil’s population, about 58 million people, lives on less than a dollar a day. The extreme inequality has led to violent clashes and farmer groups such as the Landless Worker’s Movement (MST) illegally occupying lands. Almost half of all farmland is owned by just 1% of the population.