BRAZIL Law and Practice Contributed by: Mariana Cobra, Janaína Vargas, Mayara Zanini and Marcela Freire, Mattos Filho
2.9 Condemnation, Expropriation or Compulsory Purchase Under the Federal Constitution public authorities may expropriate private land. There are two types of expropriation in Brazil, both must be preceded by legal proceedings. • Expropriation on the grounds of public need, public utility or social interest. They can be carried out by federal, state, or local govern - ments subject to: (a) the takings clause, requiring fair prior compensation; (b) the due process clause, which requires a legal proceeding that allows the landown - er to challenge (i) the public interest; or (ii) the amount of the compensation offered. • Expropriation as a penalty (less common) where: (a) land (urban or rural) is not used according to its social function; or (b) unlawful psychotropic plants are culti - vated or slave work is exploited. 2.10 Taxes Applicable to a Transaction In a purchase and sale of real estate through an asset transaction, the applicable taxes and fees are: • notary fees (when documented through a deed); • registration fees: for registration of the trans - fer instrument with the real estate registration office; • ITBI: municipal tax owed on transfers of real property or property rights – rates and exemptions depend on each municipality; and • laudêmio: transfers of useful domain of public land to or between private parties trigger this tax, payable to the government.
Notary and registration fees are determined at the State level, and, as a rule, are calculated based on the highest value of either the price of the transaction or the value of the real estate property as determined by the municipality. Transfers of shares in the property owning com - pany and partial ownership transfers (eg, change of control) are usually documented in private instruments, and therefore notary fees do not apply. If there is a change of control in the property owning company but the real estate continues to be owned by the same entity, ITBI is not appli - cable. ITBI immunity and exemption may be available in certain cases of transfer of real estate or rights of a legal entity in a capital increase, or trans - fer of assets or rights resulting from the merger, incorporation, spin-off or split-off, or termination of an entity. Usually, it is the buyer that bears the tax and fees for transfer of title and seller that bears the bro- ker fees and its income tax on any profit made on the sale of the real estate. On the due diligence side, the seller bears the costs relating to data room (documents and cer - tificates), whereas the buyer pays the costs of the professionals that will perform the due dili - gence. Parties share certain specific costs, such as environmental studies. 2.11 Legal Restrictions on Foreign Investors • Urban real properties: there are no restrictions on foreign investors acquiring or creating in remrights over urban real estate in Brazil.
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