Chapter 6: In This Chapter Introduction Foreign ownership Financing Commercial real estate Residential real estate Rental property Licensing and brokerage.

Chapter 6: In This Chapter

• Introduction• Foreign ownership• Financing• Commercial real

estate• Residential real

estate• Rental property• Licensing and

brokerage

• Government• Legal system• Economy and

business• Taxes and fees• What you need to

know• Beyond the basics• Key contacts

Page 141

Map of Brazil

Source: CIA World FactbookPage 142

Introduction to Brazil

• Portuguese is official language• Strong economy

– BRIC nation

• Energy– Diversification necessary– Non-renewable reserves– Energy efficiency and renewable energy

Page 142-146

Brazil—The Rich Tapestry

Source: Wikipedia

Page 146

Brazil—The Rich Tapestry

Source: Wikipedia

Page 147

Brazil—The Rich Tapestry

Source: Wikipedia

Page 147

Brazil—The Rich Tapestry

Source: Eyes on Brazil

Page 148

Foreign Ownership of Real Estate

• Restrictions on:– Borders– Some coastal lands– Rural properties

• Additional restrictions on agricultural land in 2010

Page 148-149

Financing

• Expansion of mortgage market– Increased protections for lenders– Expanding middle class– Government subsidies

• Foreign residents may obtain mortgages but face difficulties

• Cash transactions still common

Page 149-150

Commercial Real Estate

• Strong market• Lots of construction• Market drivers:

– Sports events– Growth Acceleration

Program

Source: FIFA

Source: Rio 2016

Page 150-152

Residential Real Estate

• No official data• Construction, prices, and

sales up according to reports– Disagreement among

analysts over existence of bubble

• Second-home market• Minha Casa, Minha Vida

Global Demand for Luxury Second Homes

Source: Knight Frank and Itacaré Capital

Page 153-154

Rental Property

• Pro-landlord– Varies by state– Caseload makes evictions lengthy

• Leases• Professional property management in

demand

Page 154-155

Licensing and Brokerage

• Licensing required• Listings• Transaction process

Page 155-156

Realtor.com/international

Page 157-161

What You Should Know About Government

• Federal presidential democratic republic with executive, legislative, and judicial branches

• Current constitution enacted in 1988 to democratize the country

• Mostly pro-market policies to foster growth should continue– Some instances of protectionism, however

Page 162-163

Legal System

• Civil law system• Contract disputes adjudicated at state

level• Judge decides all civil cases

Page 163-164

Economy and Business

• Diverse economy• Some challenges related to declining

demand for commodities• Sociopolitical pressures to improve living

standards• “Brazil costs”• Still one of the top places to invest• Technology and communications

Page 164-168

Real Estate Taxes and Fees

Real Estate Taxes and FeesTax or Fee Amount Paid by

Transfer Tax 2-4% Buyer

Notary Fee 1-2.5% Buyer

Land Registry Fee Approx 0.75% Buyer

Legal Fees 0.5-2% Buyer

Agent Commission 6% Seller

Municipal Property Tax 0.3-1.5% Owner (Buyer)Federal Rural Property Tax (some properties) 0.03-20% Owner (Buyer)

Source: Global Property Guide, International Living, Pathfinder Ltd.

Page 168

Business and Income Taxes

• Individual income tax– Residents: Progressive up to 27.5% on worldwide income – Nonresidents: 27.5% on earned income, 15% on other income on Brazil-

sourced income only• Business income tax

– Combined rate of various taxes: 34%• Withholding tax

– Interest: 15% for nonresident corporations– Royalties: Generally 15%

• Capital gains– Individual: 15% – Business: 15% on nonresident corporations on investments registered with

Central Bank• Value-added tax

– Federal: average of 20%– State: 7-25%

• Other taxes

Page 168-169

What You Need to Know

• Strong, diverse economy with some challenges• Mortgage market growing but difficult for foreigners to

obtain financing• Commercial market drivers

– Sports events– Growth Acceleration Program

• Residential market on the rise• Professional property management in demand• Licensing and CRECIs• MLSs: RedeSecovi de Imóveis and Redimob• Technology and communications• Mostly pro-market policies but some instances of

protectionism

Page 169-170

Beyond the Basics

• Greetings• Attire• Appointments• Business practices• Business dining• Taboos• Visas

Page 170-173

Key Contacts

• SECOVI-SP• COFECI• Brazilian-American Chamber of Commerce• Brazil-U.S. Business Council• USA Embassy in Brasília• USA Consulate General Rio de Janeiro• USA Consulate General São Paulo• USA Consulate Recife• Brazilian Ministry of Tourism

Page 174-175