Avoid Taxes With Real Estate

By Tricia L Chaves, Contributing Reporter

RIO DE JANEIRO — Just on the heels of the news that Rio would host the 2016 Olympic games came an announcement that incoming foreign investments were to be assessed an Imposto Sobre Operações Financeiras (Financial Operations Tax).

A fee of two percent per transaction will be charged when the money enters Brazil, in an effort to maintain stability in the short-term investment market, and perhaps capitalize on what is certain to be an increase in interest in Rio de Janeiro, and the rest of the country.

Real estate transactions are exempt from this tax making it an even better time than ever to take part in Brazil’s thriving housing market. Whether it is for a rental property, a second home, a piece of land to develop, an addition to your company or if you plan to relocate, a property purchase in Brazil is one of the best ways to participate in the country’s growing economy.

With a real estate purchase, you can get the most return and tax benefit from your investment dollar with a generous capital gains tax exemption, in as little as five years. Long-term investors are exempt once they have owned the property for 20 years or more. Even with a relatively short-term investment time of five years, investors who own just one piece of real estate are also exempt from the capital gains tax so long as the property is re-sold for under R$582,750.

Another financial benefit: residents of Brazil enjoy free public health care and education. If you choose to live in Brazil after making your real estate investment, you can deduct any health-related expenses from your annual taxes if you elect to go outside of the free public health system, plus any private education expenses incurred by you or your dependents up to about R$2,198.

The only restrictions to purchasing in Brazil for the foreigner is that property may not be located fewer than 10 km from the country’s borders or on any islands under Brazilian jurisdiction.

Brazil welcomes foreign investment but the process may be different than your home country and therefore hard to navigate without the help of a professional.  It is recommended that you procure a bi-lingual lawyer and real estate broker locally who speaks your native language along with Portuguese to ensure your purchase process runs smoothly, that you understand all of your legal rights and obligations, and to assist in filing the necessary documents for your work and permanent residency privileges.

The Rio Times reporter Nicholas Storey wrote a helpful resource titled Brazilian Property Tax Made Simple that explains how you’ll be taxed once you’re a property owner in Brazil.

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Tricia Chaves lives in Rio de Janeiro and writes a blog called Move to Brazil with information for Gringos who want to learn more about traveling, living or investing in Brazil, and writes Post Cards from Brasil about her daily life in Rio.