Taxes in Brazil for foreign nationals and Brazilians living abroad

Expats moving to Brazil or planning to work temporarily in Brazil often find that local accountants are not familiar with the international concepts, double taxation treaties or the tax rules that are applicable to expats in Brazil. There’s similar confusion when Brazilian nationals move abroad and hold on to their investments at home.

Problems can occur with Receita Federal, the Brazilian federal revenue service agency when tax returns are completed without proper reporting of foreign income or assets.

The Brazilian Tax Year

The Brazilian tax year runs from January to December. Tax returns are completed in the following March and April.

For example, the year commencing 1st January 2023 and ending 31 December 2023 is called Ano-Calendário 2023. The tax return for that year should be submitted between March and April 2024, under the Exercício 2024.

Individuals will file their Imposto de Renda Pessoa Física (IRPF) using a software released yearly from Receita Federal do Brasil.

Brazil’s Double Taxation Treaties

A full list of the countries with which Brazil has tax treaties can be obtained at:

http://receita.economia.gov.br/acesso-rapido/legislacao/acordos-internacionais/acordos-para-evitar-a-dupla-tributacao/acordos-para-evitar-a-dupla-tributacao#alemanha

There are no Double Taxation Agreements in place between Brazil and the UK, Germany or the USA. Fortunately, for expats to and from those countries, Brazil does recognise that federal taxes paid in the UK, Germany and the USA can be used as relief to tax which may be payable in Brazil.

As UK tax rates can reach percentages higher than Brazilian rates (45% in the UK, compared with a maximum of 27.5% in Brazil), it’s often the case that UK income reported in Brazil is not subject to additional taxation. However, non-disclosure of that income can lead to issues and penalties.

When do I become tax resident in Brazil?

In general terms, a foreign person will be considered tax resident in Brazil when he/she:

• Is permanently based in Brazil
• Arrives in Brazil with a permanent visa
• Arrives in Brazil with a temporary visa and stays in the country for at least 184 days in a period of 12 months

These rules have been simplified for illustrative purposes and if you are unsure of your individual position you should seek advice from a Brazilian tax expert. Please note that different rules will apply to Brazilian nationals who are leaving or returning to Brazil.

Brazilian income tax

At the most basic level, Brazilian tax residents are liable for to pay income tax on their worldwide income, once personal allowances and double taxation treaties have been taken into account.

Income tax can be paid in various ways, depending on the origin of the income. Salaries are paid net of income tax and the individual is required to pay the tax on other types of income, such as rental income, via Carne-Leão/DARF.

Once a year, the person’s total income and assets is reported to the authorities via Declaração de Imposto de Renda. Tax rates vary from nil to 27.5%. Monthly income above R$4,664.68 will attract the maximum rate of tax.

Inheritance tax in Brazil

Inheritance tax will apply during probate or donations made in life and rates will be determined by estate legislation.

It will usually be referred as Imposto de Transmissão Causa Mortis ou Doação (ITCMD or ITCD). Rates can range from nil (lower value probate), 2% in Amazonas to 8% in Sergipe and Goiás. It is expected that rates will increase in future years as estates look for more ways to raise funds, hence, a tax advisor can assist with succession planning.

Foreign Asset Reporting in Brazil – Capitais Brasileiros no Exterior

In addition to reporting Assets and Income yearly under the Declaração de Imposto de Renda, persons resident in Brazil with foreign assets above US$100,000 are also obliged to declare those assets to Banco Central do Brasil.

The Brazilian Tax Exit – Declaração de Saída Definitiva

Once a Brazilian national or an expat leaves Brazil, it is important to report to Receita Federal that the person is no longer resident in the country. Two distinct documents must be submitted:

• Comunicação de Saída Definitiva do País
• Declaração de Saída Definitiva do País

Taxes will be paid differently once the person is no longer resident in Brazil, generally via DARF or deducted at source. Please seek professional advice if you are leaving Brazil and will continue to receive income in the country. There is certain flexibility on the date that you are no longer considered resident, so you may plan accordingly.

Note that once the person has left Brazil and done the Saída Definitiva, they are no longer required to submit the yearly tax return/Declaração de Imposto de Renda, even if there are significant assets in Brazil. It is important to understand this, as many local accountants are not familiar with the Tax Exit / Saída Definitiva and may continue to submit the yearly tax return, effectively implying that the person is still resident in the country. 

Exchange of Information - OECD

Since 2017, both Brazil and the UK are signatories of the OECD Convention on Mutual Administrative Assistance in Tax Matters.

In total there are more than 100 countries taking part in the programme which allows for the automatic exchange of large quantities of data. As a result, countries are better equipped to find foreign capital or income not previously declared, working in cooperation to reduce global money laundering.

You must always seek advice before making any decisions about taxes in Brazil

This article has been written for Experts for Expats by Fernanda Ellis and is for informative purposes and does not cover all possible cases. You should always seek qualified advice from an adviser who has good knowledge of the Brazilian tax system and is familiar with expat taxation before submitting tax returns in Brazil.

You can request a free introduction to one of our Brazilian tax specialist partners who has the required qualifications and experience to assist foreign nationals living in Brazil and Brazilian nationals living abroad.

Request your free Brazilian tax introduction >