Investing in real estate in Brazil offers lucrative opportunities, but it is crucial to understand the tax implications both in your home country and in Brazil. This article uses Belgium as an example, but the basic principles are similar for residents of other EU countries. It's important to note that you must pay taxes in the country where you are tax resident, regardless of where your income originates or where your bank account is located.
Belgian taxes on rental of real estate
Since 2022, Airbnb is required to declare the income of individual hosts who are not registered as businesses to Belgian tax authorities. This is done through the EU's DAC7 data exchange system, which requires the platform to transmit information such as your personal data, earnings, and details of Airbnb services or experiences from the previous calendar year, including start and possibly end dates of your activity.
Belgian owners of real estate located in Brazil must declare these properties to Belgian tax authorities. Failure to declare may result in fines ranging from €250 to €3,000.
Real estate income
This type of income comes from renting out real estate such as residences or land. For this type of income, you must declare the cadastral income of the real estate located in Brazil in your Belgian tax return. This amount corresponds to a percentage of the total value of the property you rent out via Airbnb.
For example, if the cadastral income of your property is €150 (often lower in Brazil than in Belgium, due to the difference in property values in euros), and you rent out 100% of your property via Airbnb, the calculation would be as follows:
€150 (100% of cadastral income) × 2.1763 (2024 index) = €326.45 of rental income.
This is the amount on which you will be taxed, added to your total income. Then, you will be taxed according to progressive tax brackets (25-50%).
Suppose you fall into the 45% tax bracket, you would pay €146.90 in taxes on your rental income.
Furnished rental income
If your property is furnished, as is often the case with Airbnb rentals, 40% of your rental income must be declared as furnished rental income. You can deduct 50% as flat-rate expenses covering costs such as electricity, internet, and water. Subsequently, this income is taxed at a rate of 30%.
For example, for an annual income of €5,000 from Airbnb, you would pay €300 in taxes on furnished rental income. The calculation is:
€5,000 × 0.40 × 0.50 × 0.30 = €300
Net income after taxes
Using the above example, with annual Airbnb earnings of €5,000, you would pay €300 in taxes on furnished rental income and €146.90 on rental income, leaving you with a net income of €4,553.10.
VAT
Furnished rentals, like those offered on Airbnb, are subject to a reduced VAT rate of 6%. Since January 1, 2022, all owners must invoice VAT for rentals of less than three months. This obligation applies to both individuals and professionals, and Airbnb automatically includes VAT in its invoices.
Double taxation agreement
Belgium and Brazil have signed an agreement to avoid double taxation. This means that rental income earned in Brazil may not be directly taxable in Belgium, but it will affect your overall tax rate.
Brazilian taxes on purchase of real estate in Brazil
For individuals, when purchasing real estate, they must pay the tax on the transfer of real estate (ITBI), ranging from 2% to 3% of the property value. Upon sale, they may be subject to the capital gains tax (IRGC) of 15% on the profit realized.
For companies, the same taxes apply when buying and selling real estate.
Brazilian taxes on short and long term rentals in Brazil
This applies only to individuals who have their tax address in Brazil.
Income from seasonal and annual rentals is taxed differently for individuals and companies, with rates ranging from 7.5% to 27.5% (rate scale to be consulted here) for individuals and a fixed rate of 15% for companies.
Creating a company in Brazil
Establishing a Limited Liability Company (LDA) in Brazil involves several steps, including defining the company's purpose, choosing the structure and location, drafting the bylaws, registering with the trade register, obtaining the CNPJ (tax identification number), as well as the permits and licenses necessary for its operation.
For foreign non-resident partners in Brazil, the appointment of a resident agent in Brazil is required under Brazilian law.
Costs related to the establishment of an LDA
For the establishment of an LDA, here are the direct costs related to the accounting part:
- Fees for opening an Ltda: on average R$ 2,824.00
- Opening fees at the Junta Comercial: R$ 360.00
- Operating license from the Maceió city hall: R$ 2,000.00
- Health Surveillance fees: R$ 816.00 0
This represents a total of R$ 6,000.00.
In addition to these costs, it is advisable to budget additional funds for other unforeseen expenses such as document translations by sworn translators or hiring an agent for specific needs. We recommend budgeting approximately R$ 20,000.00 to cover all expenses. This amount is, of course, an estimate of costs, subject to changes, upwards or downwards.
Investing in Brazilian real estate can be a profitable decision, but it's essential to understand the tax implications both in your own country and in Brazil. By following the appropriate tax procedures in both countries, investors can maximize their returns while remaining compliant with the law.
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