BRAZIL Law and Practice Contributed by: Daniel Zugman and Frederico Bastos, BVZ Advogados | Bastos, Bari, Vilela e Zugman
companies, and challenges to arrangements lacking a genuine business or succession purpose. 1.4 Pre-Immigration and Exit Planning Brazil does not impose a specific exit tax on individu - als who cease to be Brazilian tax residents. Nevertheless, exit planning is important to ensure that worldwide taxation ceases and that the individ - ual becomes subject to the non-resident tax regime, under which Brazilian taxation is generally limited to Brazilian-source income and gains relating to assets located in Brazil. This requires the proper completion of the formal tax exit procedures, including the filing of the Notice of Permanent Departure and the Final Tax Return upon Permanent Departure. Failure to com - plete these procedures may result in the individual continuing to be treated as a Brazilian tax resident. Pre-immigration planning is also relevant. Before becoming a Brazilian tax resident, it is common to review foreign investment structures, including off - shore entities, trusts and other wealth-holding vehi - cles, particularly following the changes introduced by Law No. 14,754/2023. Depending on the circumstanc - es, it may also be advisable to consider the timing of asset disposals or wealth reorganisations before Brazilian tax residency begins. 1.5 Taxation of Real Estate Owned by Non- Residents and Non-Citizens Non-residents and non-citizens may acquire and own Brazilian real estate, although they may be required to appoint a Brazilian legal representative for certain tax and administrative purposes. • Direct ownership – rental income paid to non-res - idents is generally subject to withholding income tax at a rate of 15%, without the deductions avail - able to Brazilian tax residents. On the other hand, Brazilian tax residents are subject to income tax on rentals subject to progressive rates of up to 27.5%. The disposal of Brazilian real estate is also subject to capital gains tax, generally at progressive rates ranging from 15% to 22.5%, which is the same rates applicable to Brazilian tax residents. Urban real estate is further subject to annual municipal
property tax (IPTU), regardless of the owner’s resi - dence or nationality. • Planning structures – a Brazilian holding company is one of the most common structures used for real estate planning. Depending on the circumstances, it may provide a more efficient tax treatment of rental income while facilitating governance and succession planning. The benefits of indirect own - ership should be assessed against direct owner - ship, taking into account not only the taxation of rental income but also the tax consequences of a future disposal of the property or the liquidation of the holding company. This potential opportunity must be weighed with other taxes applicable to legal entities, such as VAT taxes. • Other taxes and limitations – onerous transfers of real estate are generally subject to municipal ITBI. However, the contribution of real estate to the share capital of a holding company may benefit from the constitutional ITBI immunity, provided the applicable requirements are met. This immunity may not apply where the company’s predominant activity consists of real estate transactions or where the value attributed to the property exceeds the amount effectively allocated to share capital. These issues are frequently subject to disputes in the Brazilian Judiciary. Gifts and inheritances involving Brazilian real estate may also be subject to ITCMD, including where non- residents or cross-border elements are involved. The applicable state legislation and connecting factors should therefore be reviewed on a case-by-case basis. 1.6 Stability of Tax Laws Brazilian tax legislation is characterised by frequent legislative amendments, constitutional reforms and evolving judicial precedent. Recent legislative, regu - latory and enforcement developments have further increased uncertainty, favouring flexible structures that can be periodically reviewed. Tax and estate plan - ning must therefore consider not only tax efficiency, but also governance, documentation, economic sub - stance and potential controversy. • Income Tax (IRPF) – Law No. 14,754/2023 intro - duced annual taxation for certain profits earned through foreign controlled entities and specific
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