The main legal instruments governing real estate in Brazil include:

• the Federal Constitution, which ensures the social right to property;
• Statute No 10,406/2002 (the Civil Code), covering possession, property, real rights and contracts;
• Statute No 6,015/1973 (the Public Records Law), regulating property registration; and
• Statute No 5,172/1966 (the National Tax Code), addressing applicable taxes.

Although federal statutes are predominant, state-level rules (eg, transfer taxes) and municipal regulations (eg, zoning, land use and building codes) play key roles. Additional regulations stem from administrative acts issued by agencies such as the National Council of Justice (CNJ), Instituto Nacional de Colonização e Reforma Agrária (INCRA), Banco Central do Brasil (BACEN), National Monetary Council (CMN) and Receita Federal do Brasil (RFB). Judicial precedents from the Federal Supreme Court (STF) and the Superior Court of Justice (STJ), especially under general repercussion and repetitive appeals, further shape the legal landscape.

As the applicable legislation is scattered across various sources, the relevant regulations for each sector may differ, although overlaps do exist. At a federal level, the following regulations stand out:

• project development and construction: Statute No 4,591/1964 (on Real Estate Developments), Statute No 10,931/2004 (on Civil Construction and Segregated Assets), Statute No 6,766/1979 (on Urban Land Subdivision) and Statute No 14,620/2023 (on the Minha Casa, Minha Vida Programme);
• acquisition financing and project finance: Statute No 8,668/1993 (on Real Estate Investment Funds), Statute No 9,514/1997 (on the Real Estate Financial System), Statute No 14,430/2022 (Legal Framework for Securitisation) and Statute No 14,711/2023 (Legal Framework for Legal Warranties); and
• housing law, urban law, registration law and land legislation: Statute No 10,257/2001 (City Statute), Statute No 13,465/2017 (on Urban and Rural Land Regularisation), Statute No 12,651/2012 (Forest Code) and Statute No 4,504/1964 (Land Statute).

In 2024, Brazil’s real estate market grew significantly. New developments increased by 18.6% and sales increased by 20.9%. These increases were driven by Benefícios do Trabalhador or FGTS-subsidised housing credit and the expanded Minha Casa, Minha Vida programme for families earning up to BRL12,000.

BACEN’s interest rate hike cycle prompted a shift in housing credit structures, with greater use of real estate-backed securities (real estate credit bills or LCIs, real estate receivables certificates or CRIs and covered bonds or LIGs) improving market liquidity.

The corporate real estate segment saw a recovery, with high-end office spaces in demand and record net absorption, supported by a return to in-person work and a strong labour market. In logistics, e-commerce driven demand has intensified the use of built-to-suit and sale and leaseback models, increasing the value of peri-urban areas.

Statute No 214/2025 (the Tax Reform Statute) introduced structural changes, replacing existing taxes with the goods and services tax (IBS) and contribution on goods and services tax (CBS). The new taxes will be phased in between 2026 and 2033. Mitigation mechanisms include the “adjustment reducer” (covering the real estate transfer tax (ITBI) and associated compensation) and the “social reducer” (for low-income housing), although concerns persist over increased tax burdens.

Real estate investment trusts (FIIs) and investment funds in agro-industrial production chains (Fiagros) retained income tax exemptions but IBS and CBS exemptions were vetoed. Under pressure from the sector and the financial market, the Ministry of Finance has indicated the matter could be revisited to include explicit exemptions.

Infrastructure-linked real estate has advanced, notably under Statute No 14,273/2021 (the Legal Framework for Railways), which enables real estate development tied to railway concessions. This supports projects like the Rio– São Paulo high-speed line (TAV), with BRL60 billion in projected investment and BRL27 billion in additional real estate revenue along the route.

Strategic M&A activity in 2024 to 2025 underscored the strength and legal reliability of Brazil’s real estate market. In the commercial sector, consolidation among shopping mall operators stood out. Iguatemi, in partnership with FII BB Premium Malls, acquired a 16.6% stake in Shopping RioSul (RJ), raising its ownership to nearly 50% of the BRL2.37 billion assets. In May 2024, JHSF sold minority stakes in four malls to XP Malls for BRL443 million, aligning with a high-income portfolio repositioning strategy.

In the logistics segment, driven by e-commerce, Hines sold a portfolio of four triple-A warehouses (328,000 square metres in Manaus, Rio de Janeiro, and Cajamar/SP) to XP Asset for BRL1.1 billion.

In the rural land market, major transactions also demonstrate increasing sophistication. BrasilAgro sold 12,335 hectares of Fazenda Chaparral (BA) for BRL364.5 million in March 2024, while SLC Agrícola acquired over 47,000 hectares in Bahia and Minas Gerais for BRL913 million in March 2025, reinforcing legal certainty and sectoral diversification.

Inflation and rising interest rates have reshaped Brazil’s real estate market in a segmented way. Indexation of contracts to the national construction cost index (INCC-M) (7.32%), the extended national consumer price index (IPCA) (5.06%) and the general price index – market (IGP-M) (8.58%) reflect cost pressures in construction and rent and have had a direct impact on the structuring and performance of real estate contracts. In contrast, housing loans mostly use the referential rate (TR), with a modest 1.1% annual increase, offering greater stability.

As a result, developers, asset managers and financiers carefully assessed strategies in light of market volatility and project exposure. While the national benchmark interest rate (SELIC) was initially projected at 8.5% for 2025, successive increases since September 2024 have raised forecasts to 15%. This scenario favoured high-end properties, due to higher returns and lower default and the low-income segment, supported by FGTS-subsidised credit.

The shopping mall sector reached 95.1% occupancy in the second quarter of 2024, the highest since 2019. Corporate offices, especially in São Paulo, showed recovery, supported by increased formal employment. Hospitality continued to rebound, boosted by resumed travel and PERSE (the COVID-19 pandemic recovery programme).

Capital markets responded to rising construction costs with increased issuance of CRIs, which grew 21.6% in volume and 35.3% in transactions. FIIs faced volatility during this period, but there is a trend toward recovery driven by the expectation of future stabilisation of SELIC and the appreciation of rental income, supported by rising construction costs and the value of strategic land in major urban centres, which is a positive indicator for long-term investors.

In logistics, e-commerce and supply chain modernisation drove record activity. In 2024, São Paulo’s logistics hub saw net absorption of 1.3 million square metres (up 18% from 2023), with a decade-low vacancy rate of 7.7%.

In a complex macroeconomic scenario, blockchain and fintech have opened new paths for innovation in Brazil’s real estate sector. Smart contracts have streamlined payments and guarantees, while tokenisation has improved asset liquidity and efficiency. The Brazilian Securities and Exchange Commission (the Comissão de Valores Mobiliários or CVM) has clarified that tokens representing property rights or receivables may qualify as securities, subject to capital markets regulation.

The proptech ecosystem now includes over 1,200 companies applying big data, geolocation, virtual reality and blockchain to transactions. Platforms like QuintoAndar and Loft have enhanced digital contracting and credit analysis, while fintechs explore models such as home equity and crowdfunding. Notably, aMORA raised BRL40 million via a CRI, using a model that allows property use before purchase.

Regulatory advancements, including the CVM’s sandbox for tokenised CRIs, have promoted innovation and broadened access to alternative funding. Adaptive reuse of commercial properties, encouraged by programmes like Reviver Centro (Rio) and Requalifica Centro (São Paulo) have gained traction through tax and zoning incentives.

Institutional investors have increased their exposure via FIIs and CRIs. To navigate high interest rates, developers have offered discounts, subsidised rates and direct financing. Investment decisions in the commercial sector continue to reflect monetary policy trends, with real estate returns assessed against public bond yields.

The Legal Framework for Guarantees (Marco Legal das Garantias) has strengthened the credit system, expedited out-of-court mortgage enforcement and allowed multiple assets to back a single loan. Meanwhile, home equity solutions have expanded, offering competitive credit alternatives linked to property value, helping mitigate interest rate impacts.

Legislative proposals are also advancing in land use, environmental licensing and land regularisation. PL No 2159/2021 (formerly PL No 3729/2004) seeks to establish a General Environmental Licensing Law, with standardised rules and broader exemptions. PLs No 2633/2020 and No 510/2021 aim to simplify land legalisation on federal lands, introducing self-declaration, waiving INCRA inspections and extending deadlines. In urban areas, PL No 1436/2023 intends to streamline the conversion of possession legitimisation into formal title deeds.

Land use and zoning reforms are largely occurring at the municipal level, alongside efforts to digitise urban planning by integrating public registries, municipal administrations and licensing systems.

The Civil Code provides a closed list of rights in rem, granting powers such as use, enjoyment, disposal and recovery of the asset. These include:

• full ownership (individual or shared, eg, timeshare or fractional land ownership);
• temporary rights like usufruct, use and habitation;
• surface and airspace rights;
• easements (eg, rights of way or utility installations);
• right of acquisition (registered sale promise);
• security interests (mortgage, pledge, antichresis, fiduciary ownership); and
• rights over public property, such as concession of right to use for housing (CUEM) and concession of real right to use (CDRU), tied to housing or authorised public use.

Real estate ownership transfer in Brazil follows a standardised process governed by the Civil Code and the Public Records Law, regardless of the property’s type or use. However, certain categories require additional safeguards.

• Public properties require a bidding process.
• Rural properties demand specific documentation and must comply with environmental and land use restrictions, particularly for foreign buyers.
• Financed properties involve guarantees, such as fiduciary alienation.

Environmental liabilities do not prevent the transfer but bind the buyer to legal obligations. While not a direct real estate transaction, corporate share acquisitions often result in indirect ownership or control of real estate. These do not require Real Estate Registry Office registration but must comply with corporate law provisions.

Ownership of real estate in Brazil is only transferred upon registration of the title at the Real Estate Registry Office meaning mere execution of the public deed is not sufficient. The deed typically precedes registration but may be waived in specific cases, such as transactions involving fiduciary sale.

To enhance legal certainty prior to closing, preliminary agreements (eg, buying rights) may be recorded in the property’s registry. The Brazilian property registration system is considered robust. It is partly based on the German model. Statute No 13,097/2015 reinforced the principle of concentration of acts, ensuring that all relevant legal information is centralised in the property’s Registry entry.

Due to this level of legal certainty, title insurance is rarely used in Brazil, although it may appear in transactions involving foreign investors through international insurers.

Due diligence in real estate transactions is usually led by the buyer’s legal counsel and includes a comprehensive review of legal, tax, environmental and urban planning matters. Key documents include updated property registration, encumbrance and court certificates (state, federal, labour), protest and tax clearance certificates (municipal, state, federal), and compliance with the Federal Revenue Service (RFB) and the Active Debt Registry. Additional items include permits, occupancy certificates (habite-se) and property-specific documents. Rural properties require the rural property registry certificate (CCIR), rural environmental registry (CAR) and georeferencing while urban assets demand review of zoning and administrative constraints. For condominiums, verification of unpaid dues is necessary. Physical inspections, seller background checks and environmental clearances (by the Institute of Environment and Renewable Natural Resources (IBAMA) and state agencies)) are also recommended.

Despite the protective concentration principle under Statute No 13,097/2015, which favours good faith third parties, exceptions apply, most notably Article 185 of the National Tax Code, which allows the annulment of transfers involving unregistered tax debts due to presumed fraud. Tax liability verification is therefore a critical aspect of due diligence.

In acquisitions by developers, scrutiny must be heightened to include pre-construction factors like soil testing, as unresolved issues may delay project execution, generate penalties or compromise financial viability.

In Brazilian real estate transactions, it is standard for the seller to contractually declare full ownership, absence of liens or disputes and compliance with tax, zoning, environmental and labour obligations. These guarantees are typically subject to survival periods, liability caps and carve-outs for fraud or wilful misconduct.

Statutory warranties also apply. The Civil Code establishes a five-year liability period for structural soundness and a one-year period for latent defects, which is calculated from the point of discovery. The Consumer Protection Code, when applicable, allows complaints within 90 days of delivery for durable goods. Contractual liability may be subject to a statute of limitations of up to ten years, depending on the nature of the obligation.

In large-scale transactions, representations and warranties often survive for 12 to 24 months post-closing, with extended terms for core matters (eg, ownership, tax, environmental). Cap clauses typically limit the seller’s liability to between 10% and 30% of the deal value and basket clauses, simple or tipping, set minimum indemnification thresholds.

Although not legally required, market practice demands disclosure of environmental risks, such as contamination or hazardous materials, including asbestos, which has been banned since a 2017 STF decision.

In the event of breach or false representations, buyers may pursue claims for latent defects, eviction or damages. If wilful misconduct is proven, the contract may be annulled for defective consent. While representation and warranty insurance (RWI) remains uncommon in Brazil, it has been adopted in specific high-value or foreign-led transactions.

Real estate investors must consider aspects of civil, contract, land registration, urban planning, environmental, tax, corporate, consumer protection and compliance laws, along with federal, state and municipal regulations related to acquisition, registration, land use, leasing and financing.

For acquisitions involving federal government-owned properties, specific administrative procedures apply under Statutes No 9,636/1998 and No 13,240/2015, requiring prior appraisal, bidding and demonstration of public interest.

For rural properties, Statute No 5,709/1971 imposes restrictions on acquisitions by foreigners, whether individuals or legal entities, including limitations on size, location and required governmental approvals.

A property buyer may be held liable for pre-existing environmental damage, such as soil contamination, even without having caused it. This is due to the strict liability regime and the propter rem nature of environmental obligations, meaning liability is tied to the property itself and not the conduct of the owner.

This principle is established in Statute No 6,938/1981 (National Environmental Policy) as well as the Forest Code and reaffirmed by the STJ in Theme 1,204. While good faith may not exempt the buyer from liability, it may support recourse claims against the seller.

Real estate project feasibility is primarily assessed through the municipal master plan and Zoning Law, which are both established under the City Statute. Many municipalities provide access via dedicated platforms.

For projects that fall outside standard parameters, developers may negotiate with public authorities through instruments such as:

• agreements for additional building rights or changes in land use;
• joint urban operations (operações urbanas consorciadas), which allow zoning adjustments and the issuance of certificates of additional building potential (CEPACs) to fund urban infrastructure; and
• conduct adjustment agreements (TACs), used to regularise developments under Statute No 7,347/1985.

While property rights are strongly protected in Brazil, ownership is not absolute. The law permits expropriation for reasons of public necessity, public utility or social interest, provided there is prior and fair compensation in cash, except in sanction-based expropriations (eg, land used for illegal drug cultivation or slave labour), which allow confiscation without compensation.

Expropriation must serve one of the following constitutional purposes:

• public necessity: urgent needs, such as infrastructure in risk areas (eg, dyke construction);
• public utility: convenience-driven works, like opening urban roads; and
• social interest: implementation of public policies, such as agrarian reform, affordable housing or public schools.

Compensation includes the market value of the property, actual damages (eg, improvements) and statutory additions, such as compensatory and late payment interest.

In asset deals, the main taxes are:

• ITBI;
• a municipal tax of typically between 2% and 3%, which is generally paid by the buyer, although the authorities may require payment from the legal taxpayer regardless of contractual allocation; and
• income tax (IR) on capital gains or, for real estate inventory held by specialised companies, on operational profits, including corporate income tax (IRPJ), additional contribution of social tax on net income (CSLL), social integration programme (PIS) and social contribution on billing (COFINS), unless the asset is classified as a non-current investment. Notary and registration fees also apply, with costs varying by state and costs usually being borne by the buyer.

Exemptions include IR exemption for individuals selling a sole residential property up to BRL440,000 (with no prior sale in five years) and ITBI exemption on capital contributions of real estate, except when the recipient company’s core business is real estate. This issue is awaiting judgment by the STF (Theme 1,348).

In share deals, ITBI does not apply as the property remains with the legal entity, but capital gains tax applies to the seller. Individuals are subject to progressive income tax rate (IRPF) of between 15% and 22.5% and legal entities to IRPJ and CSLL, depending on tax regime and deal specifics. PIS/COFINS are excluded when equity stakes are treated as permanent investments and not core business assets. Despite ITBI exemption in share deals, tax authorities may challenge the transaction if it is deemed it lacks a legitimate business purpose, although this matter is still being debated by the judiciary.

Foreigners may acquire urban real estate in Brazil without specific restrictions, as long as they have a Brazilian individual registration (CPF). Residency is not required and acquisitions may involve residential or commercial properties. However, purchases in sensitive urban areas, such as border zones or coastal lands, may require approval from the National Defence Council.

For rural properties, restrictions under Statute No 5,709/1971 apply. These include:

• residency requirement;
• size limits based on rural tax modules;
• INCRA authorisation for acquisitions between three and 50 modules;
• Congressional approval for areas exceeding 100 modules; and
• foreign ownership in any municipality may not exceed 25% of its area, with no more than 40% of that held by foreigners from the same nationality.

These rules also generally apply to Brazilian companies under foreign control, despite some legal debate. Statute No 13,986/2020 introduced flexibility, allowing rural properties to be used as collateral and for debt settlement and made exceptions for lawful inheritance, subject to national security considerations.

Acquisitions of commercial real estate are typically financed through bank real estate credit, CRIs and debentures. Large portfolios or companies may also resort to structured transactions, securitisation, fund of investment in receivables (FIDCs) and customised contractual arrangements such as built-to-suit and sale and leaseback transactions. These approaches provide competitive terms and risk mitigation.

The securities typically created by commercial investors are primarily fiduciary alienation and mortgages of real estate. The main distinction between these forms of securities lies in the property of the real estate. Unlike a mortgage, where the debtor is the owner of the real estate, in a fiduciary alienation the creditor holds the property until the debt is fully paid, while the debtor only retains possession of the asset. This distinction results in a faster enforcement process in fiduciary alienation compared to mortgages (see 3.5 Legal Requirements Before an Entity Can Give Valid Security).

Although less common, other forms of securities are also created by investors, such as segregated estate, corporate guarantee from the parent company and others (see 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance).

There are no restrictions preventing foreign lenders from receiving real estate guarantees over urban or rural properties, especially after Statute No 13,986/2020 (the Agro Law), removed previous obstacles. It now allows fiduciary transfers of rural properties in favour of foreign lenders and consolidation of ownership in case of default, with no obligation to resell the asset. There are also no restrictions on remitting amounts abroad resulting from enforced guarantees or debt payments. However, the transaction must be registered with BACEN.

Creating real estate security does not trigger ITBI, as it does not by itself transfer full ownership. The tax is only levied when the security is enforced and the creditor consolidates ownership due to the debtor’s default.

However, there are registry costs for creating the security, including notarial fees for executing a public deed, registration or annotation fees at the Real Estate Registry Office and the issuance of a certificate of encumbrance, which is required for the transaction. These costs depend primarily on the transaction value (calculation base) and state-level fee schedules, which are typically adjusted annually by the state court’s regulations.

For transactions involving legal entities to be valid, the formal requirements set out by law and the internal rules in their constitutional documents must be observed. There are no limitations regarding the purpose or merit of the offered security, provided that all formal requirements are respected.

After default, extrajudicial enforcement of real estate security, whether through fiduciary sale or mortgage, follows a structured procedure. The debtor is notified to remedy the default within 15 days. If unpaid, ownership is consolidated in the creditor’s name, triggering ITBI payment. This is before consolidation in fiduciary sales and after auction, adjudication or private sale in mortgage cases.

A public auction must occur within 60 days. If unsuccessful, a second auction is held (in fiduciary sale) or the asset may be appropriated or sold privately. If sale proceeds are insufficient, the debtor remains liable for the balance, which can be pursued judicially.

The 2023 Legal Framework for Guarantees introduced a streamlined, unified procedure, offering a faster alternative to traditional court actions. Judicial enforcement remains slower and more complex, although COVID-19 pandemic-related foreclosure restrictions have been lifted.

Despite faster extrajudicial options, many creditors choose debt restructuring to avoid foreclosure costs and property holding expenses. Meanwhile, a growing non-performing loan (NPL) market has emerged, with banks and financial institutions selling distressed assets to specialised funds and FIDCs, which take over recovery efforts.

Subordination may arise either by agreement between creditors, through specific clauses or contractual arrangements, or by operation of law. Under the Legal Framework for Guarantees, multiple fiduciary transfers over the same property are permitted, with automatic subordination of later guarantees to earlier ones.

In judicial reorganisation or bankruptcy, an approved plan may restructure the priority of claims, including suspending enforcement, which can effectively subordinate secured creditors. Additionally, debtor-in-possession (DIP) financing, introduced in 2020, grants super priority to credit extended during a reorganisation, allowing its guarantees to override pre-existing ones.

Environmental liability does not generally apply to creditors who only hold a security interest, such as in a fiduciary sale or unenforced mortgage and have not yet consolidated ownership. According to the STJ, liability is propter rem, attaching to the title holder, meaning the party in possession and control of the property.

Mere holding of a security interest therefore does not trigger environmental liability, even under strict liability laws. However, once ownership is consolidated, or if the creditor exercises effective control over the property, they may become liable. This interpretation reinforces that environmental responsibility depends on the actual acquisition and exercise of ownership rights.

The borrower’s insolvency does not automatically invalidate previously established security interests, except in cases of fraud or transactions made during the “suspect period”. As a rule, guarantees remain valid, as the pledged asset is excluded from the bankrupt estate. However, guarantees created or reinforced shortly before the insolvency declaration may be annulled by the court to avoid undue creditor preference. In judicial recovery, the enforcement of guarantees may be suspended during the stay period. In bankruptcy, secured creditors retain their legal priority in the distribution of proceeds from the secured asset.

Mortgage and mezzanine loan transactions involving real estate in Brazil are subject to registration fees and taxation. To establish real guarantees (eg, mortgages or fiduciary liens), registration with the Real Estate Registry Office is mandatory, with fees determined by the state fee schedule.

Additionally, these credit operations are subject to the tax on financial transactions (IOF). There is currently no differentiated tax regime for mezzanine loans, nor are there pending or proposed legislative changes affecting this treatment. The main charges applicable therefore remain the notarial registration fees and the IOF in line with the existing legal framework.

Planning and zoning regulation in Brazil involves the following three levels of government.

• Federal:
1. the Federal Constitution;
2. the City Statute;
3. the Urban Land Parcelling Statute; and
4. the Forest Code.
• State:
1. State Constitutions;
2. the Ecological Law; and
3. the Economic Zoning Law.
• Municipal:
1. the Master Plan;
2. Zoning Laws;
3. Construction Codes; and
4. Municipal Land Parcelling Laws.

Control mechanisms include urban permits, neighbourhood impact studies (EIV) and environmental impact assessments (EIA/RIMA). Sectoral agencies such as the National Environment Council (CONAMA), the National Institute of Historic and Artistic Heritage (IPHAN) and INCRA also influence land use planning.

Design, appearance and construction methods in Brazil are regulated at the following three levels of government.

• Federal:
1. Statute for People with Disabilities (Law No 13,146/2015);
2. IPHAN rules for heritage protection; and
3. Technical Standards Association (ABNT) Technical Standards (widely adopted by public authorities).
• State:
1. fire brigades: fire safety regulations; and
2. sanitary surveillance: health and hygiene standards.
• Municipal:
1. the Building and Construction Code; and
2. the Land Use and Occupation Law.

Municipalities may also impose urban obligations like compulsory parcelling or construction to ensure land fulfils its social function, although these measures are rarely enforced. The permits required include demolition, building, and habitation permits, plus technical responsibility annotations from engineers/architects (ART/RRT). Compliance with federal, state and municipal rules is essential for constructive regularity, with the building permit serving as the core evidence.

For off-plan sales, registration under Statute No 4,591/1964 (the Incorporation Law) is mandatory. Urban compensation tools, such as the transfer of development rights (TDC), may also apply in specific cases.

The regulation of real estate development and land use in Brazil involves all levels of government. Municipal authorities, through town halls and city councils, are primarily responsible for zoning, urban planning and licensing, applying local laws.

States play a key role in environmental licensing for medium-scale projects and regional co-ordination. At the federal level, the Ministries of Cities and Environment, through IBAMA and the National Centre Research for Conservation of Freshwater Fishes (ICMBio), oversee conservation areas, pollution control and federal land use. The Federal Patrimony Secretariat (SPU) manages beaches, mangroves and other federal assets. IPHAN may impose restrictions on heritage properties, while INCRA monitors rural land use and compliance with agrarian reform policies.

The licensing process for new developments typically starts with the urban feasibility consultation (consulta prévia), followed by municipal approval of the architectural project and issuance of the building permit. For developments involving autonomous units for sale, prior registration under Statute No 4,591/1964 is mandatory.

Larger projects may require environmental licensing (EIA/RIMA), a neighbourhood impact study and approvals from bodies such as the Fire Department and Health Surveillance. The administrative transparency principle ensures third-party participation through public hearings (CONAMA Resolution No 009/1987) and the possibility of administrative challenges. Judicially, civil and popular action lawsuits are available, with legal standing granted to associations and the Public Prosecutor’s Office, which may also initiate civil inquiries, sign conduct adjustment terms or take legal action under Statute No 10,257/2001 to halt irregular construction.

Structural renovations require technical documentation and, if applicable, a structural stability report. The Civil Code protects neighbouring property owners, allowing legal measures in cases involving safety, noise or health risks.

Administrative appeals against denied urban planning permits are governed by Statute No 9,784/1999 and local regulations, following the administrative hierarchy with deadlines varying by jurisdiction. After exhausting administrative remedies, judicial review is permitted.

Third parties with legitimate interests may challenge permits through civil or popular actions. The Public Prosecutor’s Office also holds standing to challenge acts harmful to urban order, including proposing permit suspension or entering conduct adjustment terms. Courts recognise the standing of residents’ associations when they demonstrate legal interest or concrete harm from the contested decision.

Real estate development often requires legal agreements with government entities and public utilities to address infrastructure works, environmental compensation and provision of public facilities, especially in land parcelling. These are formalised through the urban commitment agreement, which may include measures like the solidarity quota for social interest housing (HIS). Key instruments include the transfer or grant of the right to build (TDC), allowing construction beyond zoning limits in exchange for municipal compensation and public-private partnerships (PPPs) for urban, housing and sanitation projects. For large-scale redevelopment, urban consortium operations (OUCs) enable zoning adjustments, with CEPACs issued as tradeable securities granting additional building rights and financing urban infrastructure.

Development and land use restrictions are enforced by municipal governments through planning, construction and environmental departments, using their police power. Inspections may be routine or complaint-driven and sanctions include notices, orders to regularise, embargoes, permit revocations, and, in severe cases, demolition. Infractions may also trigger state or federal action, including fines and embargoes by IBAMA or state environmental agencies.

The Public Prosecutor’s Office can initiate civil inquiries or public civil actions to halt irregularities, seek compensation or enforce compliance. The City Statute authorises progressive urban building and land tax (IPTU) and, ultimately, expropriation for persistent non-compliance. Criminal liability applies in cases of illegal parcelling or environmental crimes. Courts adopt the fait accompli theory only exceptionally, prioritising legality in urban enforcement.

To carry out real estate transactions and acquisitions in Brazil, investors may adopt various legal structures. The limited liability company (LTDA) is the most common form due to its operational simplicity, contractual flexibility and limited liability tied to share capital. The corporation (S.A.) is preferred for structures involving multiple investors or capital market fundraising, with shareholder liability limited to their equity interest.

Two corporate vehicles are widely used in the real estate sector:

• the special purpose company (SPE), designed for specific projects, allowing assets and risks to be segregated; and
• the silent partnership (SCP), which formalises partnerships with undisclosed investors, exempting them from commercial registry requirements and offers greater discretion.

In the capital markets, real estate investments may be structured through FIIs, FIAGROs, which also allow investment in rural properties and private equity investment funds (FIPs), often used to acquire stakes in companies that hold real estate assets.

These vehicles offer advantages such as tax efficiency, enhanced governance and potential liquidity via secondary market trading. Foreign investors typically operate through local entities or Brazilian subsidiaries, subject to BACEN and RFB regulations. The appropriate legal structure depends on the investor’s profile, tax planning strategy and the required level of governance and transparency.

The LTDA is commonly used for equity holdings and smaller real estate developments. It is favoured for its simplicity and tax flexibility. The corporation (S.A.) is better suited for complex ventures of multiple investors, requiring more structured governance.

SPEs are widely adopted to isolate risks in specific projects and facilitate financing, particularly when linked to the special taxation regime (RET), which streamlines and reduces taxes on development revenue.

SCPs are contractual entities without legal personality, composed of an ostensible partner and silent (undisclosed) partners, with taxation solely applied to the ostensible partner.

Investment funds, structured as condominiums without legal personality and regulated by the CVM are used in multi-investor operations, offering tax efficiency, limited liability and governance. FIIs are focused on the acquisition, leasing and operation of real estate, with publicly traded shares and potential income tax exemption for individuals, subject to legal conditions.

FIAGROs follow a similar model but target agro-industrial real estate, including rural properties while FIPs are used to acquire equity stakes in companies holding real estate assets, combining corporate participation with real estate exposure.

FIIs and FIAGROs are the investment vehicles in Brazil that most closely resemble REITs, although they have key structural differences. Unlike REITs, which are for-profit legal entities, FIIs and FIAGROs are structured as closed-end condominiums without legal personality. They are regulated by the CVM. These funds are designed for the acquisition, leasing or exploitation of real estate assets and may be public (traded over-the-counter) or private (not publicly traded and restricted to qualified investors). They are open to foreign investors, subject to registration with BACEN and the RFB.

FIIs are not taxed at the fund level. Income distributed to Brazilian individuals is exempt from income tax, provided the fund has at least 100 quotaholders, its quotas are traded exclusively on the stock exchange or organised over-the-counter market and the individual holds less than 30% of the fund’s quotas or is entitled to receive less than 10% of its total income. However, capital gains from share sales are subject to income tax.

FIIs must distribute at least 95% of their semi-annual profits to shareholders. Law 14,754/2023 also excludes groups of related individuals who jointly hold 30% or more of the fund’s quotas or are entitled to more than 30% of the fund’s total earnings from this exemption.

These funds are subject to governance and operational requirements, including management by an authorised institution, a formal regulation document and applicable fees (eg, management, performance, brokerage, custody), which affect net returns to investors.

Recent tax reform discussions under Complementary Law No 214/2025 have introduced uncertainty regarding the imposition of the IBS and CBS on FII revenues such as rent. After industry pushback, the government indicated it would reinstate explicit exemptions for these operations to preserve the fund’s tax efficiency.

There is no legal minimum capital requirement for the incorporation of the main entities used in real estate investments. An S.A. requires at least 10% of the subscribed capital to be paid in cash. FIIs and FIAGROs operate as investment condominiums and do not have mandatory share capital.

Governance requirements for real estate investment vehicles in Brazil vary by legal structure. LTDAs, under the Civil Code, offer flexible management defined in the articles of association, with decisions typically made by simple majority. S.A.s are governed by Statute No 6,404/1976, which requires formal structures with collegiate bodies (general meeting, board of directors and, if provided for, board of directors and fiscal council), mandatory publications and, if publicly traded, independent auditing and compliance with CVM rules.               

FIIs and FIAGROs structured as closed-end condominiums under CVM Resolution No 175/2022 must have a trustee, manager, independent auditor and fund regulations, with governance via shareholders’ meetings and CVM oversight. They must distribute 95% of profits and disclose regular financial information.

RFB Normative Instruction No 2,119/2022 requires the identification of final beneficiaries with significant control in both domestic and foreign entities. Non-compliance may result in National Registry of Legal Entities (CNPJ) suspension and make financial operations unfeasible. The rule aligns with international standards, such as the US Corporate Transparency Act, which mandates similar disclosures to Financial Crimes Enforcement Network (FinCEN), including for structures with assets in Brazil.

Annual accounting and compliance costs in Brazil vary depending on the structure and transaction volume. Simplified entities like LTDAs and SCPs have lower costs, covering bookkeeping, tax filings and basic obligations. S.A.s, especially listed ones, incur higher costs due to required publications, independent audits and formal governance.

FIIs and FIAGROs, which are regulated by the CVM require a more complex structure of fiduciary administrator, professional manager, auditor and regular filings, which significantly increases costs. Despite this, higher expenses are often offset by strategic advantages such as capital market access, enhanced governance and greater tax efficiency.

The applicable use structure depends on the nature of the property. In urban areas, leasing is governed by Statute No 8,245/1991 and in rural areas, by the Civil Code and agrarian laws. Other valid instruments include lending (free loan), usufruct (temporary right in rem for use and enjoyment) and surface rights (construction on another’s land under the City Statute).

For public property, mechanisms include;

• concession of use;
• CDRU;
• registrable and lasting; and
• authorisation of use (precarious and revocable) for temporary occupations.

More complex structures include built-to-suit, which links custom construction to atypical leasing and sale and leaseback, where a property is sold and immediately leased back, enhancing liquidity without loss of possession.

Non-residential leases are the main legal instrument for the commercial use of urban real estate. They allow for greater contractual freedom, especially in contracts with a term of more than five years.

The Statute itself provides for specific contractual regimes, such as leasing in shopping malls, which have a broader negotiating autonomy and the built-to-suit model, where the property is built on demand by the tenant with minimum terms and atypical clauses.

For rural properties, the applicable arrangements are rural leasing, with payment in cash or equivalent and rural partnership, established under the Land Statute, involving shared risks and profits from productive activity. Both require written contracts and must comply with specific legal requirements.

Rents and contractual terms are negotiable, especially in commercial leases, except for cogent provisions laid down in the Lease Law, which regulates issues such as guarantees, rent review, minimum terms, termination and evictions. In cases not covered by this rule, the Civil Code applies on a subsidiary basis.

In agrarian contracts, there are mandatory clauses set out in Decree No 59,566/1966 and the Land Statute, which limit contractual autonomy due to the social function of the land and the protection of rural producers.

No duration limits exist, although tenants may qualify for compulsory renewal (see 6.17 Right to Occupy After Termination or Expiry of a Lease).

Maintenance responsibilities are divided between landlords (property delivery, pre-existing defects, extraordinary expenses) and tenants (ordinary maintenance, minor repairs).

Rent is typically paid monthly and cannot be demanded in advance although it may be where rentals are made on a seasonal basis or there are rental guarantees.

Rural leases follow specific legislation requiring three to seven year minimum terms (depending on operation type) and mandatory written contracts with statutorily required clauses.

Brazilian lease agreements may freely define adjustment indices, excluding linkage to minimum wage or foreign exchange, with a minimum interval of 12 months. Standard practice includes annual adjustments based on IGP-M or IPCA, as allowed by Law No 8,245/1991.

Beyond automatic adjustments, rent may be revised:

• judicially after three years (see 6.7 Payment of VAT); or
• by mutual agreement.

Under the Civil Code, unforeseen events causing excessive burden may justify revision.

See 6.5 Rent Variation and 6.7 Payment of VAT.

Real estate rentals in Brazil are not currently subject to municipal service tax (ISS) or state VAT equivalent (ICMS) as they don’t constitute the provision of services or the circulation of goods. However, rental income is subject to PIS and COFINS following the STF’s 2024 Decision on Issues 630 and 684. With Constitutional Amendment No 132/2023 and Complementary Statute No 214/2025, real estate leasing will be taxed under the new IBS and CBS system.

To minimise the impact on the sector, a 70% reduction in rates will apply to real estate rental, cost assignment and leasing operations. The legislation also establishes that individuals earning over BRL240,000 annually from renting more than three properties will be classified as taxpayers under this new tax regime.

At the beginning of the lease, the tenant may have to pay costs in addition to the rent, such as a rental guarantee, which is limited to one type. Fire insurance and the cost of reconnecting essential services are also common.

As a rule, down payments are forbidden. However, in specific commercial leases, such as those in shopping centres, case law admits the contractual provision for charging amounts such as a promotion fund, if they do not counteract rules of public policy.

Common areas in Brazilian buildings are maintained through condominium fees paid by owners proportionally to their ideal fractions. Under the Tenancy Act, ordinary expenses are assigned to tenants while extraordinary expenses remain the landlord’s responsibility.

Condominium fees are propter rem obligations tied to the property regardless of occupancy. Since the condominium has no direct legal relationship with tenants, even when lease contracts transfer payment responsibility to tenants (standard practice), the condominium can demand payment directly from the owner in case of default. The landlord maintains passive solidarity and may subsequently seek reimbursement from the tenant.

Utilities and telecommunications expenses are the tenant’s responsibility. These obligations are personal, not propter rem and so fall directly on service users. Properties with multiple occupants typically have individual metering with consumption billed directly to user unity. In older buildings, water and gas charges are often included in condominium fees and distributed based on each unit’s ideal fraction rather than actual consumption.

Urban property tax (IPTU) and rural property tax (ITR) are propter rem obligations owed by the property owner or possessor according to the National Tax Code. Standard practice allows the contractual transfer of payment responsibilities to tenants. While this transfer is valid between parties, it doesn’t eliminate the landlord’s tax liability. Tax authorities may demand payment from either party in case of default, as both remain jointly liable toward the government.

Fire insurance is mandatory for condominiums. Premiums are distributed among owners as ordinary expenses. For urban leases, landlords are responsible for supplementary fire insurance unless contractually stipulated otherwise and are typically transferred to tenants in practice. Non-condominium properties handle insurance by agreement between parties.

Rural properties commonly utilise multi-risk insurance covering weather damage, fires and events threatening agricultural production, although not legally mandated. During the COVID-19 pandemic, attempts to claim business interruption insurance largely failed as policies excluded pandemics and courts upheld these exclusionary clauses.

Lease agreements can specify property purpose, which tenants cannot unilaterally change. Violations may trigger termination and eviction. Subletting or assignment requires express landlord consent. Property use also faces legal restrictions including zoning rules, environmental licensing and building regulations. In condominiums, tenants must follow conventions and internal regulations. If they do not, they risk having to pay fines and if they commit repeated violations they risk being expelled.

Tenants may alter leased properties subject to legal and contractual constraints. Brazilian law categorises these interventions as improvements or accessions. Under Law No 8,245/1991, necessary improvements (preserving the property) are compensable even without authorisation. Useful improvements (enhancing functionality) require prior consent for compensation and retention rights. Voluptuary improvements (aesthetic) aren’t compensable unless expressly agreed. STJ Precedent 335 validates contractual waivers of improvement compensation.

However, for permanent incorporations (accessions), STJ ruling REsp 1,931,087/SP (2024) established that improvement waiver clauses don’t automatically extend to authorised accessions. Unauthorised modifications constitute contract breach, potentially triggering termination and forfeiting compensation rights.

Law No 8,245/1991 regulates urban leases, excluding parking spaces, advertising spaces, hotels and financial leasing contracts, which are regulated by the Civil Code. The Law categorises leases as residential, non-residential or seasonal (limited to 90 days). Special purpose properties (schools, hospitals, religious temples) receive stronger tenant protections under Article 53. Built-to-suit contracts (Article 54-A) allow waiving rent revision rights and permit a fine of the full amount remaining in the event of early termination. Rural leases follow the Land Statute with public order provisions, including restrictions on foreign acquisition/leasing requiring INCRA authorisation depending on area and location.

During the COVID-19 pandemic, the Emergency Legal Regime established temporary measures including eviction suspensions and termination fine exemptions for vulnerable tenants, which expired after the public emergency period.

Tenant insolvency doesn’t automatically terminate Brazilian leases unless contractually specified. In judicial recovery or bankruptcy (Law No 11,101/2005), landlords become unsecured creditors, but guarantees like sureties remain enforceable despite insolvency proceedings.

If tenant default results from economic crisis, the landlord may pursue termination and eviction, except when the property is essential to the business operation under bankruptcy protection.

In urban leases, if the tenant remains in the property for more than 30 days after expiration without landlord opposition, the contract extends indefinitely per Article 56 of Law No 8,245/1991. Repossession requires 30 days’ notice and potentially an eviction lawsuit with a 15-day vacate injunction possibly being issued.

Commercial tenants may claim compulsory renewal (see 6.4 Typical Terms of a Lease). For rural leases, the Land Statute grants tenants preferential renewal rights. Landowners must provide six months’ notice of third-party offers or intent to directly exploit the property. The absence of this notification results in the automatic renewal of the contract unless the lessor subsequently expresses this in a notary’s office.

Lease assignment or subleasing requires express landlord authorisation in line with Article 13 of Law No 8,245/1991. Without consent, these actions constitute breach of contract and could lead to termination and eviction. Rural leases follow similar rules under the Land Statute.

Commercial contracts commonly include clauses permitting assignment to companies within the same economic group, allowing corporate restructuring without contractual terms being breached or the tenant’s right of first refusal being violated.

Urban leases can be terminated through mutual agreement, contract breach, default on essential obligations or necessity for urgent government-mandated repairs. Tenants may unilaterally terminate with proportional penalty payment, while landlords cannot terminate early without legal grounds except in specific scenarios like sale of the property without a validity clause registered in the registration. In this case the purchaser can terminate the contract with 90 days’ notice.

For leases with an indefinite term, unmotivated termination is allowed with 30 days’ notice. Special use properties (hospitals, schools) have termination restrictions under Article 53 of Law No 8,245/1991. Built-to-suit contracts may include early termination penalties equivalent to the contractual balance. Rural leases follow protective regulations with mandatory minimum terms under the Land Statute. Property sale doesn’t terminate these leases and repossession requires notification to be given six months before the expiration of the contract.

Lease registration in Brazil provides two key benefits: right of first refusal to purchase the property and effectiveness against third parties when including a validity clause. Without registration, the STJ has ruled that wronged tenants can only seek damages and not property adjudication.

For the validity clause to protect against property sale, registration must be completed according to Article 167, I, 3 of the Public Records Law.

Rural lease registration confers no additional benefits, but it remains advisable to publicise the relationship and prevent conflicts with good faith purchasers.

While legislation doesn’t specify who bears registration costs, tenants typically pay as primary beneficiaries of the protections.

Forced eviction of rented property depends on a court decision in an eviction lawsuit, which can be taken in the event of default, termination of the contract or the tenant’s refusal to return the property at the end of the contract.

Law No 8,245/1991 provides for eviction by final ruling (30-day deadline) or preliminary injunction (15-day deadline). For injunctive relief, landlords must provide security equivalent to three months’ rent and meet specific requirements under Article 59(1), including non-payment without guarantees, voluntary vacation notice or expiration of fixed-term contracts.

During the COVID-19 pandemic, the Emergency Legal Regime suspended evictions for vulnerable tenants, but these exceptional measures have expired. No extraordinary restrictions currently apply.

Although infrequent, rural lease and rental agreements in Brazil can be terminated by third parties, especially by public authorities, in the following cases:

• expropriation for public necessity, public utility or social interest;
• expropriation sanction of underused urban properties or unproductive rural land under the City Statute and the Land Statute; and
• administrative requisition for temporary use in emergencies.

Owners receive compensation, which must be prior and fair in traditional expropriation cases and subsequent in administrative requisitions. The lessee or tenant can claim damages for possession interruption or goodwill losses. Eviction timelines vary by procedure type (judicial or administrative) and case complexity, with no standard duration.

In case of tenant default, landlords in Brazil may seek remedies such as fixed contractual penalties (eg, three months’ rent) or proportional to the remaining term, with built-to-suit contracts often imposing fines equal to all outstanding rent, plus compensation for property damage beyond normal wear, repair costs and late payment penalties.

Although there is no legal cap on compensation, courts assess reasonableness on a case-by-case basis. Landlords may also enforce guarantees (cash deposit, surety, bank guarantee) and initiate extrajudicial enforcement based on the lease’s executive title and protest unpaid amounts. In exceptional cases, courts may award goodwill losses, but the landlord’s duty to mitigate damages can limit recovery if reasonable steps to reduce losses are not taken.

Rental contracts commonly include guarantees to reduce the risk of tenant default. The cash deposit, limited to three months’ rent, is widely used and must be held in a linked savings account, with return plus interest at the end of the lease, unless there are debts or damages. Capitalisation bonds, movable and immovable property may also serve as guarantees.

Other frequent forms include rental insurance, where an insurer covers unpaid obligations for a monthly premium and bank guarantees, involving a credit letter from a financial institution with immediate enforceability in case of default. Guarantees can only be triggered upon breach and landlords cannot demand advance payment or retain amounts without justification. Courts prohibit cumulative guarantees and require proportionality in their enforcement.

There are three main types of contracts:

• global price contracts, with a fixed amount and cost risk borne by the builder;
• management contracts, where the builder is paid a fee or a percentage of actual costs; and
• hybrid models, such as the guaranteed maximum price (capping expenses) and engineering, procurement, and construction (EPC) (turnkey contracts with full contractor responsibility for design, procurement and execution).

Land acquisition through exchange for future units enables project initiation without upfront payment, by allocating part of the development in return for the land. The built-to-suit model, under Article 54-A of Statute No 8,245/1991, links customised construction to an atypical lease, with a full early termination penalty, ensuring contractual security without immediate disbursement by the tenant.

As of 2024, building information modelling (BIM) is mandatory in public tenders, pursuant to Decree No 10,306/2020, aiming to enhance financial accuracy and project risk management.

It is common for contractors to outsource design services and for the execution to be carried out separately by the construction company. This separation is typical in management contracts, where the contractor manages technical and operational aspects, while the owner directly bears all costs, including design. In the public sector, two key models governed by public procurement laws are used:

• integrated contracting, where the contractor is responsible for both design (including the basic project) and execution; and
• semi-integrated contracting, in which the Public Administration provides the basic project and the contractor prepares the executive project and executes the works.

Which model is chosen will depend on the project’s complexity and the legal criteria of technical and economic convenience, as provided for by law.

Risk allocation in construction contracts is typically managed through indemnity clauses, contractual penalties, performance guarantees, insurance and liability limitation provisions. In global price contracts, the builder has a legal duty to guarantee the construction’s soundness and safety for five years.

Liability limitations are allowed if agreed between technically and economically balanced parties, provided they do not breach public order or result in unjust enrichment or excessive penalties. These limitations often involve pre-fixed damages for specific situations.

However, in contracts governed by the Consumer Protection Code, these clauses are ineffective and liability for construction defects cannot be limited. In more complex or financed projects, insurance policies, such as engineering risk and general civil liability, are commonly used to transfer and mitigate operational, technical and financial risks.

Time risk in construction projects is managed through contractual tools authorised by the Civil Code, such as default penalty clauses, set as daily fines or percentages of the contract value and triggered upon objective delay. In real estate developments, Statute No 13,786/2018 formalised a 180-day legal tolerance for project delivery. Under STJ Theme 970, if compensatory penalties are expressly agreed, they absorb claims for lost profits related to the same delay.

In large-scale infrastructure or commercial projects, more advanced tools are used, including:

• liquidated damages clauses, which waive the need to prove actual loss;
• acceleration clauses, allowing the owner to require faster completion for added compensation; and
• step-in rights, enabling lenders to intervene in case of critical delays.

To mitigate performance risks, particularly in large projects or those involving CRIs, contractors and financiers often require additional guarantees. Common mechanisms include:

• performance bonds;
• bank guarantees;
• corporate guarantees from the parent company, often with waiver of the benefit of order;
• retention of 5% to 10% of contract payments, released upon project completion;
• linked accounts, with disbursement tied to milestone achievement;
• segregated estate, mandatory in off-plan developments; and
• real estate guarantees, such as mortgages on assets owned by the developer or third parties.

The Brazilian legal system does not grant automatic retention or lien rights to builders or designers in case of non-payment. However, creditors may seek judicial protection. In foreclosure actions, they can request a premonitory registration and, later, a judicial mortgage, which grants priority in proceeds from sale or expropriation.

If the debt relates to the construction of the property itself, it may override the inability of family property to be seized (Statute No 8,009/1990, Article 3, II). While owners commonly withhold payments until stages are completed, contractors cannot withhold the construction site as leverage for payment.

The use of buildings for their intended purpose requires the issuance of the “Habite-se”, which is a certificate granted by the municipal authority confirming that construction complies with the approved project and urban planning laws. Without it, occupation is considered irregular, subject to administrative sanctions and prevents registration with the Real Estate Registry Office, making it impossible to individualise and sell units. A partial “Habite-se” may be granted for phased occupation, as long as each stage is completed and fully compliant.

Additional documents may be required depending on the project, such as the fire department inspection certificate (AVCB) and environmental licences, in line with Statute No 6,938/1981.

There is no VAT on real estate purchases and sales in Brazil. The main tax on acquisitions is the ITBI, which is a municipal tax with a rate ranging from 2% to 4% and is calculated on the transaction value or the value determined by the tax authority, whichever is higher. Immunity applies when real estate is contributed to the share capital of companies whose core activity is not real estate.

For sellers, real estate sales may generate capital gains, taxed federally at progressive rates from 15% to 22.5%, depending on the gain. Legal entities under the real, presumed or arbitrated profit regimes are subject to specific tax rules.

In free transfers (donation or inheritance), the state estate tax (ITCMD) applies, with rates of up to 8%, which are now progressive following the 2025 Tax Reform. Additionally, transfers of useful domain over federal property require payment of laudemium, which is set at 5% of the property’s value.

Real estate transactions in Brazil frequently involve corporate structures to optimise taxation, particularly to reduce ITBI incidence. A common practice is the purchase of shares in SPEs that hold real estate instead of direct property acquisition, which is an approach upheld by the Administrative Tax Appeals Council (CARF) and the STF, as long as there is no misuse of purpose.

Another strategy is contributing real estate to equity holding companies, relying on the constitutional ITBI immunity. STF Theme 796 confirmed this immunity but limited it to the value effectively paid into the share capital.

Non-remunerated exchanges are also used to defer taxes and CARF has ruled that IRPJ and CSLL do not apply to these transactions under the presumed profit regime. Structures involving FIIs, FIPs and SCPs are often adopted for tax efficiency. However, contributions of property into FIIs are subject to ITBI, as affirmed by STJ precedents.

Brazilian legislation does not impose a specific tax on the occupation of commercial real estate. However, the use of urban properties generally entails tax burdens, particularly the IPTU, which is levied on ownership, possession or useful domain. Although the tax is formally owed by the owner, it is typically passed on to tenants in lease agreements.

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, associations, 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 garbage collection, urban maintenance and public lighting.

Income earned by foreign investors from real estate activities in Brazil is subject to withholding 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 investors domiciled in tax havens. Double taxation treaties may reduce or eliminate IRRF, depending on the specific agreement. To optimise tax efficiency, foreign investors often use FIIs. These funds are exempt from IRRF if the criteria outlined in 5.3 REITs are met.

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 deductions 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).