When it comes to Brazil (or other countries for that matter), there are several factors involved in the decision to relocate, including the tax significance.
Whether you’re a Brazilian resident or not, you need to be aware of Brazil‘s tax requirements and laws and how they may apply to you.
This article shed some light on your tax responsibilities as a foreigner in Brazil, and also as a Brazilian in foreign countries
Who Must Pay Taxes in Brazil?
Generally, foreign citizens are taxed depending on the visa they hold.
Legal residents of Brazil for tax purposes include the following:
- An individual who lives in the country more than 183 days per year in Brazil in any 12-month period.
- Naturalized Brazilian residents
- Non-Brazilians who hold a permanent or temporary visa with a local employment contract
- Non-Brazilians who hold a temporary visa without a local employment contract.
Brazil adopts a standard that tax residents should have their income taxed on a universal basis. Brazil has the privilege to tax income wherever it has been earned. For Brazilians who live abroad, but never formalized the tax exit, the CPF (Cadastro Pessoal de Pessoa Física /Individual Taxpayer Registry) registration with the Federal Revenue Service continues to inform the status of tax resident in Brazil. And the IRS (Internal Revenue Service) expects to receive the income tax return, which must include the income and assets existing overseas.
The Brazilian Tax Year
The tax year obeys the calendar year ending on December 31st, and Brazilian tax returns are filed yearly by April 30th. Taxes owed will be due by April 30th, with an alternative to pay in monthly installments, liable to interest.
Individuals will file their Imposto de Renda Pessoa Física (IRPF)/individual income tax using a software released yearly from Receita Federal do Brasil (Brazil‘s federal revenue)
Brazil’s Double Taxation Treaties
Foreign citizens who are tax residents in Brazil must pay tax on income yielded in Brazil and abroad unless they are qualified for relaxation under a Double Taxation Treaty between Brazil and their home country.
Brazil has double taxation treaties with several other countries, which indicate that tax paid in one country can be offset against any tax payable in the other. However, there is presently no such agreement between Brazil and the U.S., UK, or Germany.
Luckily, for expats to and from those countries, Brazil recognises that the federal taxes paid in the UK, Germany, and the USA can be employed as a relief to tax which may be payable in Brazil.
Brazilian income tax
If you have a resident taxpayer status, then you are subject to pay income tax in Brazil on your universal income on a monthly cash basis, once personal allowances and double taxation treaties have been taken into consideration.
This process is called Carnê-Leão and it involves income that wasn’t subject to withholding tax by another local source. Generally, this refers to offshore income and rental income received from other people. This tax is also evaluated based on a progressive tax table starting with the rate of 0% to 27.5%.
Once a year, the individual’s total income and assets are reported to the administration via Declaração de Imposto de Renda.
Additionally to reporting Assets and Income yearly under the Declaração de Imposto de Renda, Brazilian residents with foreign assets above US$100,000 are also compelled to declare those assets to Banco Central do Brasil.
Inheritance tax in Brazil
Brazil has no inheritance tax. But, some states may require a death transfer and a donation tax and rates will be specified by estate legislation.
This is usually called Imposto de Transmissão Causa Mortis ou Doação (ITCMD or ITCD). Its rates can range from 0% to 8%. It is expected that rates will inflate in future years as estates look for more ways to raise funds, thus, a tax advisor is recommended to assist with succession planning.
Municipal Tax
Some cities may charge a service tax on specific businesses or a real estate transfer tax. A yearly urban real estate tax for property owners is also applicable at virtually 0.6%, but in some areas, it can be as high as 1.4% of the assessed value of the property, but this will differ according to the city concerned.
The Brazilian Tax Exit (Declaração de Saída Definitiva)
As solidified by Brazilian Law, a person who ceases to live permanently in Brazil must transmit to the RFB (Receita Federal do Brasil – Brazil’s federal revenue) both the Communication (Comunicação de Saída Definitiva do País – CSDP) and the Declaration of Definitive Exit of the country (Declaração de Saída Definitiva do País – DSDP), which will indicate his/her residence for tax purpose upon leaving Brazil.
However, if the person doesn’t file the CSDP, he/she is still regarded as a tax resident of Brazil for the first 12 months of absence.
But if the individual files the reports and is no longer resident in Brazil, taxes will be paid differently generally via DARF or subtracted at source.
Exchange of Information – OECD (Organisation For Economic Co-Operation And Development)
To assist evolving countries, the OECD established a multi-stakeholder Task Force on Tax and Development bringing together OECD member countries, arising and developing countries, global and regional organizations, civil society, and companies. Together, the objective is to take action to boost the enabling environment for developing countries to collect applicable and adequate tax revenues and to build effective states.
Brazil is a signatory of the OECD Convention on Mutual Administrative Assistance in Tax Matters. And totally, there are over a hundred countries taking part in the program which enables the automatic exchange of large amounts of data. As an outcome, countries are better equipped to find foreign capital or income not formerly declared, working in cooperation to reduce universal money laundering.
Conclusion
Every circumstance is unique and should be analyzed individually. The proper analysis must be conducted to determine the correct conclusion, taking into account the different ways that a Brazil non-resident is taxed differently from a resident.
If you plan to invest into Brazil, to register your company or buy a real estate property, please contact your Damalion expert now.
