BRAZIL Law and Practice Contributed by: Alberto Malta, Davi Ory, Ana Vogado and Maria Eduarda Amaral, Malta Advogados
IPTU rates vary by municipality and depend on the property’s characteristics and assessed value. Exemptions or reductions may apply based on the taxpayer’s profile (eg, associa - tions, embassies) or the nature of the property (eg, listed buildings, low-income housing or public interest properties). Additional municipal charges may also apply, including fees for gar - bage collection, urban maintenance and public lighting. 8.4 Income Tax Withholding for Foreign Investors Income earned by foreign investors from real estate activities in Brazil is subject to withhold - ing income tax (IRRF), which must be collected by the party making the payment. The IRRF rate depends on the nature of the income and the investor’s country of residence. Lease income is generally taxed at 15% while capital gains on property sales are taxed at progressive rates from 15% to 22.5%.
Meanwhile, the rate increases to 25% for inves - tors domiciled in tax havens. Double taxation treaties may reduce or eliminate IRRF, depend - ing on the specific agreement. To optimise tax efficiency, foreign investors often use FIIs. These funds are exempt from IRRF if the criteria out - lined in 5.3 REITs are met. 8.5 Tax Benefits Real estate ownership in Brazil can offer tax advantages, depending on the tax regime and investor profile. For companies under the real profit tax regime, expenses such as depreciation (4% annually), IPTU, insurance, maintenance and upkeep are deductible from IRPJ and CSLL, as long as the property is tied to the company’s core activities. Under the presumed profit regime, these deduc - tions are not allowed, as the taxable base already factors in estimated costs. These are 8% of gross revenue for real estate activities and 32% for services. Individual investors in FIIs may qualify for income tax exemption (see 5.3 REITs ).
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