Making sense of Brazil's taxation system

Making Sense Of Brazil's Taxation System

Source: www.expatfocus.com 1
The Brazilian Taxation System
“The Brazilian taxation system has been
called tricky, complex, or downright
confusing! With around 90 forms for tax,
duties and contributions, you’ll need to
ask yourself some basic questions to get
to grips with how taxation will affect you in
Brazil. Are you working there? If so, is that
for a company or yourself? Are you retired?
Do you plan to buy land or property? All
these questions will affect how you’re
taxed.”
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The Departments
To an extent, tax in Brazil can be classified according to the department
collecting the taxes. There are:
Federal taxes, which are regulated and
collected by the Federal government,
State taxes, which are regulated and collected
by each state’s government,
Municipality taxes, which are regulated and
collected by each municipality’s government.

Taxes for Resident Expats
“If you’re an expat who has become
resident, you’ll have to pay tax. You’re
a resident if you’ve been naturalized,
have a permanent visa, or have a
temporary visa with an employment
agreement. You’ll also be subject to
tax-residence status if you stay in
Brazil for more than 183 days in any
12-month period. This status will
apply for 12 months after your last
departure from Brazil.”
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Non-Residents’ Taxes
“If you’re a non-resident (that is, a
migrant, holder of temporary visas
without an employment contract
with a local company, or someone
who hasn’t completed 183 days in
Brazil within a 12-month period),
you’ll only be taxed on your
Brazilian income.”

The Taxed Income
“Brazil operates a system in which
a maximum of 27.5% of your income
can be taxed, with social security
contributions deducted too. If you’re
a resident who is subject to tax in
Brazil, you’ll have to pay tax on both
your Brazilian and your overseas
income, unless your country of origin
has a double taxation treaty with your
adopted nation and you can offset
some of your tax.”

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Carnê-Leão process
“If you’re working for a Brazilian
company, they’ll probably deduct your
tax at source. If you’re self-employed,
e.g. if you have offshore or rental
income from elsewhere, you will have
to make your own payments monthly
at a commercial bank (a process
called Carnê-Leão: you can deduct
expenses and the year’s income and
contributions will be adjusted for
your final return).”

Corporation Income Tax
“If you start a company in Brazil, then
you’re liable for corporation income
tax on the profits from your trade or
business. If it’s a new company, the
registration process is quite complex
and you must pay tax on either a
quarterly or annual basis. You may
also have to make quarterly or monthly
payments of estimated tax. After the
end of the year, a tax return must be
produced by the last working day of
June in the year which follows the fiscal
year in which the income was made.”

Types of reductions available for taxpayers in Brazil:
• Payments made for educational expenses, up to an annual limit of
BRL2,198 ($1,266)
• Brazilian Private Pension Plan contributions, up to 12 percent of
gross income
• Social security rates
• Donations, medical expenses and so on; a 20 percent maximum
of the global annual income.
• You may also be able to claim deductions for your dependents:
children, spouses and other relatives.

Taxed Gains
“Capital gains are generally subject
to tax at 15 percent for non-residents
(with some exceptions). Gains from the
sale of securities on a public stock
exchange are taxed at 20 percent for
all Brazilian residents. There are no
inheritance or wealth taxes, but some
states may insist on a death transfer
and a donation/gift tax. Nor does Brazil
have an equivalent of VAT, although
there is a sales and services tax (ICMS)
of around 18 percent as well as an
excise tax (IPI).”

Tax on urban land
“This is collected annually if you
own urban property. Check for any
exemptions; for instance, these
include if you are a pensioner/retiree
receiving less than three minimum
salaries per month, if you do not own
other property in the same city or if
you live in the property and are
seeking an exemption.”

Tax on rural real estate
“This is because rural land may
spread across municipalities;
Brazil is a huge country. Again,
it’s paid annually and depends
on the amount of ‘naked’ land
you own; that is, land that is
not used for production.”

Tax System Intricacies
“These taxes may differ between
municipalities so it’s important
to check the tax system in your
particular area. Sounds
complicated? Tax in Brazil
certainly isn’t straightforward,
but if you do your homework and
seek advice once you’re on the
ground, you should be able to
navigate its intricacies without
too much difficulty.”

Making sense of Brazil's taxation system

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