Who pays the IPTU? This question is often raised in real estate lease transactions. According to Brazilian law, the owners of residential and commercial properties are responsible for paying the IPTU tax. Although a lease agreement may require the tenant to pay, ultimately, it’s the landlord’s responsibility.

IPTU stands for Imposto sobre a Propriedade Predial e Territorial Urbana. It’s the property tax assessed by the municipality each year on urban real estate. The tax rate varies among cities and depends on the property’s purpose and the assessed value (valor venal).

For instance, the city of Rio currently charges 1% for residences and 2.5% for businesses. In contrast, the city of São Paulo’s base rate is 1% for residences and 1.5% for businesses, with the possibility of higher rates based on the property’s assessed value.

While a lease agreement can require the tenant to pay the property tax just as it often does in the case of utilities, the owner remains liable to the government for the tax if the tenant doesn’t pay. The owner may have a claim against the tenant for breach of contract, but an IPTU tax debt will attach to the property itself.

A prudent landlord knows that, at the end of the day, paying the property tax is their responsibility. Regardless of the terms in the lease agreement, landlords in Brazil should always keep an eye on the IPTU payment history. With the IPTU number, it’s easy to check whether all taxes on the property have been paid.