Effective Tax Rate on Rental Income
|Click here to see a worked example
|Source: ACAL - Consultoria e Auditoria S/C and KPMG Disclaimer
Nonresidents are liable to tax on Brazilian-sourced income. Married couples are generally taxed jointly but married couples married under the separate property regime can opt for separate taxation. A spouse who is taxed separately may not be considered a dependent for tax purposes.
INCOME TAX (Imposto de Renda de Pessoa Fisica)
Nonresidents are generally taxed on their gross income at a flat rate of 15%. However, the income tax rate may change depending on the type of income derived and the residency status of the taxpayer.
Nonresidents earning rental income from Brazilian property are taxed at a flat rate of 15%, levied on the gross rent.
Rental income earned by nonresidents who reside in low-tax territories are taxed in Brazil at a special rate of 25%. Low-tax countries are defined as those countries that impose no tax on income or impose a corporate tax rate less than 20%.
CAPITAL GAINS TAX
Capital gains realized by nonresidents on sale of real property, are subject to Brazilian tax at a rate of 15%. The taxable gain is computed by deducting the acquisition costs and transaction costs from the gross selling price or market value of the property.
Capital gains realized by nonresidents who reside in low-tax territories are taxed in Brazil at a special rate. Low-tax countries are defined as those countries that impose no tax on income or impose a corporate tax rate less than 20%. As of January 2004, capital gains earned by individuals residing in these countries are subject to 25% withholding tax.
Municipal Tax on Real Estate
(Imposto sobre a Propriedade Predial e Territorial Urbana or IPTU)
Property taxes are imposed on the assessed value of urban properties, as assessed by the municipality. The tax rates vary from one municipality to the other.Typical rates arearound 0.3% to 1% levied on the assessed value of the property, an assessment usually lower than market value.
Federal Rural Property Tax (Imposto sobre a Propriedade Territorial Rural or ITR)
Rural property tax is levied on the land located outside the urban zones of the municipality. Unlike the IPTU, this is a federal tax. The tax rates vary from 0.03% to 20% depending on the number of hectares of land and the ratio which the utilized area bears to the total land area. Property owners are liable to pay this tax.