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Created in the 1966 (governed by Law 8,036), the Fundo de Garantia do Tempo de Serviço (FGTS) (best described in English as a Guaranteed Fund of Unemployment) was essentially designed to support a worker who was fired from their place of employment.  Prior to the FGTS’s creation, for every year an employee worked they would be entitled to an equivalent of one month’s salary should they be dismissed.  Additionally, those who had worked for over ten years would be entitled to further stability guarantees.  This, in turn, led to employers laying off workers immaturely (and often unnecessarily) to avoid the mounting overheads.  The law was then created for company CEOs to be required to place a set value of 8 percent of the salary for each employee in to the Caixa Econômica which can be claimed in the event of dismissal.

This fund is worth knowing for property investors in Brazil due to the fact that it is one of the contributory factors that is assisting the growth of the property market.  In short, if an employee has worked for more than 36 consecutive months for the same company, they can draw down some of the fund to assist with the purchase of a property (provided that they are not already a homeowner).  It is often marketed by developers and agents as a means of encouraging sales and viewed by the Brazilian public as an excellent way to assist them getting on the housing ladder.  Below are some basic rules governing Brazilian homebuyers wanting to make use of the fund:

• the applicant cannot be an owner, buyer or promisor of a property financed by the Sistema Financeiro da Habitação (Bank of Brazil Housing Finance System);
• the applicant cannot be an owner, buyer or promisor of an existing property nor one that is in construction in his/her own city of residence or is in where his/her main occupation is being undertaken (including within neighbouring municipalities);
• applications can be made to the FGTS housing fund for buildings in construction provided the project can be proven to be 40 percent completed (legal documentation is required);
• a married couple’s FGTS application would be counted as one;
• the FGTS can be claimed against another property if the current property an applicant is residing in has been inherited or given as a donation;
• the FGTS can be used for an applicant to construct on a piece of land but a full plan of works will need to be presented and approved;
• the FGTS cannot be used for commercial property in any way, shape or form;
• full documentation is required upon application including evidence of current residence (a rental agreement, for example) as well a utility bill, photo identification and CPF (Brazilian Social Security) number;
• those who are self-employed; temporarily employed, civil servants or military personnel are not permitted access to the FGTS.

For more information about the fund please click on the following link (in Portuguese): Fundo de Garantia do Tempo de Serviço (FGTS)

Alternatively, please email us at info@brazilinvestmentguide.com with any questions.