Taxation in Brazil
The sections below provide the basic information on taxation in Brazil.
|Taxable Income Band BRL||National Income Tax Rates|
|1 – 22,847.76||0%|
|22,847.77 – 33,919.80||7.5%|
|33,919.81 – 45,012.60||15%|
|45,012.61 – 55,976.16||22.5%|
Rental payments to non-residents from Brazilian sources are subject to a 15% final withholding tax. Other payments to non-residents from Brazilian sources are generally subject to 25% final withholding tax, unless a lower treaty rate applies.
Residents are taxed on worldwide income. Non-residents are taxed on Brazilian-source income only. Under Brazilian law, source is defined as the place where the payer is located, regardless of where the services are provided.
The various types of income subject to tax are described below.
Employment income - Taxable employment income generally includes wages, salaries, and any other type of remuneration and benefits received by an employee from an employer. The treatment of employer-provided allowances varies, as described below.
Schooling allowances for an individual's family members are considered indirect salary and are taxed accordingly. For tax purposes, no distinction is made between amounts paid directly by the company or reimbursed by the company to an employee. Moving allowances are generally not taxable if paid in a lump sum by the employer.
Under Brazilian law, individuals are taxed on a cash basis. Payments from foreign sources, including bonuses or premiums related to services rendered, that are made before or after an assignment in Brazil are generally not taxable if received during a period when the individual is not resident for tax purposes.
Reimbursements received by employees from employers for income tax liability are recognised as income on a cash basis. If employers make the income tax payments directly, the amounts paid are taxable to the employees.
Other allowances received by expatriates for work performed, including foreign service premiums and allowances for home leave, costs of living and housing, are subject to regular taxation.
Self-employment income - Self-employed resident individuals are subject to tax on income from a trade, business or profession.
If a self-employed person's business activity shows a loss in one month, the loss may be carried forward to a later month in the same fiscal year (but not into a new year) if the proper supporting documentation is provided.
Investment income - Interest income received by resident individuals from sources abroad is generally included in taxable income and is taxed at the rates stated above. Local financial income and gains from fixed or variable interest financial investments are taxed exclusively at source. The rates vary from 15% to 22.5%, depending on the investment term. In general, financial institutions withhold the tax due and the earnings are credited net.
Net rental income and royalty income from Brazilian and foreign sources are generally included in taxable income and are taxed at the rates stated above.
Brazilian dividends paid to non-residents are exempt from withholding tax. Rental payments to non-residents from Brazilian sources are subject to a 15% final withholding tax, and other payments to non-residents from Brazilian sources are generally subject to 25% final withholding tax, unless a lower treaty rate applies. Financial investments should be analysed on a case by case basis.
Taxation of employer-provided stock options - Employer-provided stock options are not subject to tax at the time of grant. In general, stock options are taxable at the time of exercise. The difference between the market price and the strike price is considered a fringe benefit and is taxable as employment income at a maximum rate of 27.5%.
The Senate has established a maximum estate and gift tax rate of 8%. States may levy estate and gift tax on transfers of real estate by donation and inheritance at any rate, up to 8%. A rate of 4% generally applies in São Paulo and in Rio de Janeiro, the rate can vary from 4% to 8%, depending on the values involved.. Resident foreigners and non-residents are subject to this tax on assets located in Brazil only.
For transfers of property through succession, inheritance or donation, the assets may be valued at either market value or the value stated in the declaration of assets of the deceased or donor. For transfers carried out at market value, the excess of market value over the value stated in the declaration of assets is subject to income tax at the capital gains rates above.
All individuals earning remuneration from a Brazilian source are subject to local social security tax, which is withheld by the payer. Contributions are levied on employees at rates ranging from 8% to 11%, depending on the level of remuneration, with a maximum required monthly contribution of BRL642.34. Employers’ contributions are calculated at approximately 26.8% to 28.8% of monthly payroll, without limit.
Corporate social contributions on employment related income paid overseas (that is, the portion of split-payroll arrangements that is paid outside Brazil) are considered a grey area under the Brazilian tax law. According to Labour Reform, amounts paid, even if frequently, as fringe benefits, food allowances (not covered by its payment in cash), travel expenses, premiums and bonus allowances are not part of the employee's ordinary compensation. Accordingly, the above payments might not constitute basis for the calculation of labour and social security charges.
The Greater Brazil Plan took effect in August 2011. This plan changed the pricing model of social security contributions in Brazil with respect to the part of the contribution levied by the employer. Under this plan, employers do not pay the ordinary social contribution at a rate of 20% of payroll. Instead, the social security contribution is calculated according to a flat rate applicable to the gross revenue of the company, which can vary from 1% to 2.5%, depending on the sector and the case. The reduction allowed by The Greater Brazil Plan applies only to the ordinary employer social security contribution of 20%.
Self-employed individuals’ contributions are calculated at a rate of 20% of base salary. The base salary is fixed by the government, and its value depends on when the self-employed individual joined the social security system. The maximum monthly contribution for a self-employed person is BRL1,167.89
Brazil imposes a pay-as-you-earn (PAYE) system. Under the PAYE system, income tax on income received by an individual through a foreign payroll should be paid on a monthly basis through a tax voucher known as carnê-leão. In addition, for the portion of the compensation paid through a Brazilian payroll, taxpayers are subject to withholding income tax.
Individuals who receive income from more than one source may pay the difference between tax paid or withheld at source and their total monthly tax liability at any time during the fiscal year or when they file their annual federal returns in the year following the tax year. The balance of tax due is payable either in a lump sum when the return is filed or in eight monthly instalments. The instalments are subject to interest based on a monthly rate set by the Central Bank (approximately 1% per month).
Income tax on foreign earnings or on earnings received from other individuals in Brazil on which no Brazilian tax is withheld at source must be paid monthly, as described above. The tax is due on the last working day of the month following the month when the income is received. Late payments are subject to penalties (at a daily rate of 0.33%, limited to 20%) and to interest (at a monthly rate of approximately 1%).
To make monthly income tax payments, residents must register as individual income tax contributors and obtain a Taxpayer Identification Number (CPF) (http://www.receita.fazenda.gov.br). Disclosure of the CPF number is mandatory in most financial transactions.
Tax on capital gains derived from Brazil is generally not included in the total annual tax liability calculated in the federal return. Instead, tax on capital gains is due on the last working day of the month following the month when the gain is realised. Special rules apply to gains derived from transactions on stock exchanges.
Individuals resident or domiciled in Brazil who hold foreign assets of at least USD100,000 on 31 December of the preceding year must submit an annual Declaration of Assets and Rights Held Abroad. The due date is usually 5 April of the following year. Such declarations must be filed quarterly, based on the dates of 31 March, 30 June and 30 September, if the total value of the assets and other items that the declarant holds abroad is USD100,000 or more on those dates.
Determination of residence for tax purposes depends on which visa an individual uses to enter the country. Individuals are considered to be tax residents from the moment of arriving in Brazil if any of the following conditions are satisfied:
Other foreign nationals are taxed as non-residents if they satisfy the following conditions:
A foreign national who remains in Brazil for longer than 183 days is subject to tax on his or her worldwide income at the progressive rates applicable to residents.
Before their departure from Brazil, tax residents should file the Departure Communication and the Departure Income Tax Return and obtain tax clearance to resolve their final liability for Brazilian income tax. Otherwise, these individuals may be considered resident for tax purposes, subject to Brazilian income tax on worldwide income during the 12-month period following departure. From the time the expatriate applies under the departure process mentioned above, the expatriate is taxed as a non-resident on Brazilian-source income only.
Capital gains are defined as the difference between the sale price of an asset and its acquisition price.
Effective from 1 January 2017, gains realised on the sale of assets and rights of any nature (real estate, vehicles and shares) are subject to the following progressive tax rates.
|0 - 5,000,000||15%|
|5,000,001 - 10,000,000||17.5%|
|10,000,001 - 30,000,000||20%|
If the sale price exceeds the above-mentioned thresholds, the entire gain is taxed at the rates stated in the above capital gains table.
A special exemption is granted to individuals selling their only residence if they have owned it for at least five years and if the sale price does not exceed BRL440,000. In addition, gains derived from sales of residential real properties are exempt from tax if the seller uses the proceeds from the sale to buy other residential real properties in Brazil within 180 days from the first contract execution date.
The following are the only deductible expenses permitted when calculating monthly income tax liability:
On the annual federal income tax return, the taxpayer may elect the standard deduction, which is 20% of taxable income up to a maximum deduction of BRL16,754.34, or may deduct the following amounts:
In general, taxes paid to other countries may offset Brazilian income tax on the same foreign income, if the other country grants reciprocal treatment for taxes paid in Brazil. Brazil has entered into double tax treaties with 33 countries.
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The Tax section is provided by EY in accordance with their Terms and Conditions This link opens in a new window . EY accepts no responsibility for the accuracy of any of this information. By using this information you are accepting the terms under which EY is making the content available to you based on the legislation and practices of the country concerned as of 1 July 2019 by EY and published in its Worldwide personal tax guide, 2019-20. Tax legislation and administrative practices may change, and this document is a summary of potential issues to consider. This document should not be used as a substitute for professional tax advice which should be sought for the country of arrival and departure in advance of moving in order to discuss your circumstances. It is your responsibility to ensure you make all relevant disclosures to the tax authorities and that you are compliant with local tax legislation.
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