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Donations from US Donors to Brazilian Residents

Brazil Real Estate Growth

Given the difference in richness between the US and Brazil, there is a large number of donors in the US who need to transfer funds to people in Brazil.

Some of the donation needs we have assisted in our legal practice:

  1. Donation for Purchase of Real Estate in Brazil
  2. Donation to Fund a Startup
  3. Donation for Family Purposes

For a donation to be conducted legally, there are three major steps to be followed:

Step 1 – Drafting and Executing a Donation Agreement

Step 2 – Structuring the Donation Transfer with the Bank

Step 3 – Paying the Donation Tax

Let’s discuss:

Donation Purposes

Not all purposes are allowed for a donation. The most common legal donation purposes we observe in our practice are these:

1.      Donation for Purchase of Real Estate in Brazil

Buying real estate in Brazil is not as easy as buying in the US. Cash is always in short supply and a large share of the Brazilian population is simply unable to save enough money to buy their home.

It is not unusual for a US benefactor to step in to assist a Brazilian in finally buying their first properties. And, to make this possible, a formal donation process is the right path to follow.

It is important for both the US donor and the Brazilian donee (the person receiving the donation) to understand that there is heavy red tape when it comes to transferring funds from the US to Brazil.

When it comes to real estate transactions, there is an additional layer of red tape since banks and registration offices (cartórios) alike will require several documents to allow a real estate transaction involving the US and a Brazilian party to go through.

Retaining the services of a law firm experienced with such transactions is key to making sure all is done legally and avoiding issues that could result in fines and legal trouble for both the donor and the donee.

2.      Donation to Fund a Startup in Brazil

In our practice, we also assist with transactions where a donor in the US will remit funds to a donee in Brazil to start a business. In some cases, a family member will send money to his relative in Brazil so this relative can start their own business.

Working as an employee in Brazil may mean a life of deprivation unless such an employee has had the opportunity to study in ivy league schools and universities. Relatives living in the US have access to abundant opportunities for finance and money accumulation that simply do not exist in Brazil.

To have such a donation done properly, it is important to secure a lawyer who has experience with the drafting of donation documents as well as structuring the transfer with the right banks.

3.      Donation for Family Purposes

The chances of a family member achieving richness is substantially higher in the US. For this reason, it is common for us to assist people living in the US to donate sums of money to relatives living in Brazil.

Transferring substantial sums of money in Brazil requires a high degree of attention to the laws and regulations involving the donation itself, the transfer that must be done through the right banks, and the resulting tax that must be paid timely.

Securing a law firm specializing in assisting such transactions between the US and Brazil will help keep you clear from the traps and dangers of doing something wrong.

Donation Main Steps

Although there are many details involved in a donation process involving a US donor and a Brazilian donee, the main three steps are described below:

Step 1 – Drafting and Executing a Donation Agreement

A donation must be documented in an agreement between the donor and donee. Although a donation agreement is not complex, there are certain components that must exist in such an agreement. The lack of such elements may jeopardize the legitimacy of the transaction and expose the parties to claims of fraud and serious penalties by both the Brazilian Bank Authority and the Taxation Authority.

For any substantial amounts of money, it is highly recommended that you secure the services of a law firm experienced in such area.

Step 2 – Structuring the Donation Transfer with the Bank

It is naive to expect that banks such as Bradesco, Itau, Banco do Brasil, etc. will be anxiously waiting to help you. The truth is that the Brazilian Central Bank has enacted heavy sets of regulations when it comes to moving substantial sums of money.

Because of such regulations, there is also the risk of heavy penalties when a bank doesn’t follow all the rules. So, for such banks, there is a limited upside (the money they can profit from your transaction, but a huge potential downside (some of the fines are in the hundreds of thousands of reais).

Step 3 – Paying the Donation Tax

It is not unusual for people in the US to send funds to people in Brazil without any supporting documents. While apps such as Wise (formerly known as TransferWise), MoneyGram, and WesternUnion have made it easier than ever to send money to Brazil, it is also true that those ignoring the formalities are risking penalties, trouble with the tax authorities, and even prosecution for money remittance crimes.

In addition to the proper documentation of a donation, paying the associated donation tax is a must. It is the payment of the donation tax that clears the money being received by the donee. In other words, the money being received by the donee will be considered legitimate only when the donation tax is paid.

Although some Brazilian states allow for low amounts of money to be gifted without triggering the need for a formal donation, it is important that you discuss the money gifting to be discussed in detail with an attorney experienced in such transactions.

We Can Help You Get This Right the First Time

If you are donating money to someone in Brazil, make sure to get proper advice. It would not be wise to give money to someone else while setting yourself up for trouble.

We can help you draft the donation agreement, obtain pertinent documents when needed, structure the transfer with banks experienced with international money transfers, and advise you on how to pay the resulting donation tax in Brazil.

Schedule a consultation with our team now to learn how we can help you: