JIPYONG LLC

Jipyong News|News Update

Expanding Into Brazilian Cities Through Land Acquisition

2011.07.15

1. Introduction 
 
For the past several articles, I have been informing you on how a local Brazilian subsidiary, after properly establishing and managing a corporation, can run into legal issues in its operation. Following the problem of obtaining a representative visa, the next topic is the acquisition of local Brazilian land (not only purchasing the land but leasing the land as well.) 
 
 
2. Limitations to a Foreigner's Acquisition of Brazilian Land 
 
Although Brazilian law is generally not limited for foreign corporations and foreigners, there are limitations when it comes to the acquisition of local Brazilian land. A municipality is divided into two areas, the urban area and the rural area. The rural area is subject to the following limitations. 
 
A. For Foreign Individuals (Personal) 
 
There is a limit to the amount of rural land a foreign individual can buy or lease. The rules differ from city to city, but generally the amount of land is limited to 5,000ha (Law Chapter 5709/71 Article 3).B. For Foreign CorporationsUnlike the case for foreign individuals, foreign corporations do not have limitations to the acquisition of rural lands. 
 
B. Common Restrictions Foreign Individuals And Foreign Corporations 
 
Single foreigners and foreign corporations are allowed to acquire a total of 25% of the rural area concerned(Law Chapter 5709/71 Article 12); foreign nationals are allowed to obtain a total of 10% of the rural area concerned(Law Chapter 5709/71 Article 12 Section 1). The above limitation is applied equally to all majority-owned subsidiaries in Brazil. 
 
 
3. Matters to Attend to With Regards to Land Acquisition 
 
A. When purchasing land 
 
If you are planning on buying land locally, there are a couple of things you need to take into consideration. First, check the registration and make sure that the seller is the owner and also make sure that there is no lien on the land. Also, check to see if there are any defaults on land taxes or if there are any claims filed against the land. 
 
It is possible to check for any defaults on land taxes by checking the IRS website or by checking the city and/or state tax office. It is possible to check to see if there is any pending litigation against the current landowner by checking either the state or federal court website. Because Brazilian law, just like Korean law, requires completion of registration for transfer of interest in real property, it is crucial to complete registration after purchasing any real property. 
 
B. When leasing land 
 
If you are leasing the land rather than purchasing the land, the aforementioned Clause 2 applies, and thus you must check that the area of the land does not go over the limitations set by the city. Also, if the landlord sells the land to another person before the lease ends, make sure that the lease under the new owner includes the same provisions and is registered with the real estate registry office (Cartório de Registro de Imóveis). 
 
C. Other things to check for 
 
(1) Issues with establishing a factory 
 
Although there is no separate approval process for establishing a factory if you are entering an industrial complex, if you are entering an area that is not an industrial complex, you need to make sure that you are allowed to build a factory in that area and you must get a license from the government that allows you to build there. Since building permits, environmental permits and other such permits are also required in order to build a factory, you must take several things into account from the beginning. However, I will write about these things in the next newsletter. 
 
(2) Tax-related Issues 
 
The city government has the right to real estate taxation and sets the rate of real estate acquisition taxation (Imposto sobre a Transmissăo de Bens Imóveis-ITBI). In São Paulo, the ITBI rate is 2% (São Paulo Law No. 51,627/10 Article 12 Clause II, Decreto no. 51,627/10, artigo 12, inciso II). However, If the corporation is being transferred by a payment in kind, the IBTI is not applied to the land (Constitutional Law Article 156 Paragraph 2 Clause 1, Constituição Federal, artigo 156, parágrafo segundo, inciso I).Also, you must consider the federal government's small campaign on rural real estate(Imposto sobre a Propriedade Territorial Rural-ITR). In the case of ITR, you will be charged 0.03%~20% for the actual area of land and for the use of the land accordingly. 
 
(3) Miscellaneous Issues 
 
State or city governments that seek to attract investment will, depending on the size of the investment, give free land support, free long-term lease and other such incentives so it is better to check for these things ahead of time.

Awards & Commissions Jipyong and Duroo were Honored with “Public Interest Award” at the 6th Korea Legal Awards 2023.12.12

Back to List

Related Practices

Central & South America

Related Practices

SHARE

Disclaimer

Limited Liabilities