Escaping Brazil’s Capital Gain Tax

Profits from the sale of assets are generally subject to Brazil’s capital gain tax. However, as we mentioned before, there are exemptions and reductions that can apply to local taxpayers. With just a little familiarity of the rules, you can structure your transactions in a more tax efficient manner.

Take the case of old real estate. No matter how profitable the transaction, the government won’t charge capital gain tax on the sale of properties acquired before 1969. And property acquired between 1969 and 1988 is subject to a reduced tax. For instance, 80% of the gain is reduced if the property was bought in 1973.

Sales of real property for amounts up to BRL$440,000 are also exempt. But for the exemption to apply, the seller cannot own other real estate and cannot have sold any other properties in the last five years.

An exemption also applies when a seller uses the proceeds from the sale of one property to buy another within 180 days. In this case, the exemption is valid only for residential properties when the seller of the old house and the buyer of the new house are the same person. This benefit can be used once every five years.

There are similar exemptions for the sale of other assets - not just real property. So it’s important to understand the tax rules and how they apply before you enter into purchase and sale transactions. If you’re a Brazilian resident, you might just be able to escape paying the capital gain tax.