This publication provides a high level overview of the tax, social security and work permit regulatory compliance requirements for expatriates engaged to work in Brazil.
Contents
The establishment of a foreigner's tax residence determines their status as a tax resident in Brazil and the tax residence will depend on the type of visa the expatriate enters Brazil with. Grant Thornton Brazil can assist expatriates and their employers by helping to track the fiscal residence acquisition process and the Brazilian Tax filing requirements. Also, GT Brazil can help with the visa application and issuance of all Brazilian documents.
Once tax residency is established, all income received anywhere in the world will be subject to taxation in Brazil. International tax agreements can be a helpful tool in order to avoid double taxation and Social Security contribution.
The taxation may occur on a monthly or annual basis, depending on its nature. In any case, an individual who has established the tax residency in Brazil must file an Income Tax Return in the year following the establishment of residency. In subsequent years, the filing of the Income Tax Return is applicable to Brazilian residents who meet certain parameters, indicated each year by the Brazilian authorities.
Also, residents in Brazil that owns more than USD 1 million of assets and rights abroad Brazil must present a report to Brazilian Central bank report between Feb 15th until April 05 of each year. This report does not result in any tax to pay, it´s only informative.
Click on each of the areas below to expand for more information:
Facts and figures
Depending on the foreigner´s nationality it´s possible to enter Brazil without a visa and under this circumstance it´s possible to apply for a labor permission without leaving the country.
For any foreigner it´s possible to require a Taxpayer ID (CPF number) This application is done directly at Brazilian tax authorities´ system.
For foreigners that will be hired by a Brazilian company it´s mandatory to issue a SS ID and a Worker ID.
Below are the main types of visa to arrive in Brazil with:
Visa type:
Tourist Visa
When the tax residency will start: After 183 days in Brazil within a 12-month period or when the foreigner register itself at BR federal police (whatever happens first).
Technical Visa
When the tax residency will start: After 183 days in Brazil within a 12-month period or when the foreigner register itself at BR federal police (whatever happens first).
Visa with Labor Contract/ Investor Visa
When the tax residency will start: The day of entry in the country.
Without visa (available for certain nationalities)
When the tax residency will start: The day of register at Brazilian Federal Police.
Digital Nomad
When the tax residency will start: After 183 days in Brazil within a 12-month period or when the foreigner register itself at BR federal police (whatever happens first).
Other types of visas require a specific study on tax residency establishment.
The Brazilian tax year for individuals starts on January 01st and ends on December 31st.
Once the fiscal residency is established in Brazil, the individual that receive salary abroad, must calculate the tax due on a monthly basis, based on the progressive table that can reach 27,5%.
For the individuals that receive income from the Brazilian company, the taxes are also treated among the progressive table but the tax due is withheld by the company.
Between March and May of the following year, the individual is subject to file the Brazilian Income tax return. Also, the Brazilian central bank report can be applicable, as per the above.
There are 2 different models of BR Tax return: complete and simple. On the complete model, the taxpayer can apply for a bigger discount on the tax calculation by presenting deductible payments such as medical and school expenses. The simple model offers a standard discount, and no further deduction will be considered on the final tax calculation.
The tax return can result in a tax refund (that only will be deposited at a Brazilian bank account) or in tax due (that can be paid through a tax voucher). The payment deadline is the same as the filing: May 30th.
Besides the Income tax return, if the individual holds assets abroad Brazil in a total amount (equal or superior) to USD 1 million as of Dec 31st of each year must file the Annual report to the Brazilian central bank (called Declaration of Brazilian Capital Located Abroad – DCBE).
When a tax resident in Brazil leaves the country without the intention of going back on the next 12 months or on a permanent basis is required to present a Departure process.
The departure process comprehends 2 different procedures:
Communication of departure in which the individual must indicate the date of departure, the dependents leaving as well. The deadline is February 28th of the following year of departure.
Exit Tax return in which the individual must report all information applicable for a regular tax return, the difference here is the period: this tax return will only comprehend the period of residence in Brazil. The deadline is the same as the Income tax return. This final return also results in a tax due/refund.
Basis of taxation
At the Annual income tax return is possible to present expenses in order to decrease the basis calculation of the income tax: dependents such as spouse, children and parents; tuition and medical services; alimony; private pension plan and medical insurance – only paid to BR companies.
In general, benefits paid for the expatriate can be taxed according to the source. Therefore, housing, meal allowances, provision of a car and relocation allowances will come within the charge to Brazilian income tax in addition to the individual’s salary. However, if these benefits will be as the compensation in kind, paid not in cash by the employer, of such type as: food compensation, donation of vehicles, house appliances, etc. Then the value of services in kind (goods or services) might be classified as a nontaxable expense of the employer for corporate income tax purposes and might not be taxed as a personal income.
No concessions or benefits are available for expatriates.
Federal taxes paid abroad may result in a relief for the Income Tax in Brazil, when in accordance with International Tax Agreement in order to avoid the double taxation. Some countries does not hold an international tax agreement, but reciprocity tax treatment, that can also be a relief before the tax due in Brazil.
Other taxes
Once considered fiscal resident in Brazil, the income received by the individual is subject to taxation and for the income sourced from the financial investments held abroad Brazil is taxed at a flat rate, at the Annual Income tax return, of 15%.
Income earned from sales of assets must be taxed in accordance with the capital gain tax regulation. The tax rates varies from 15% - 22,5%.
Inheritance and donation are considered exempt from Income tax, but it can be subject to taxation through the state tax called ITCMD, the rate varies from 2% - 8%, depending on the state that the donation/inheritance is received.
The individual who owns property in Brazil is subject to payment of municipal tax called IPTU and the rate varies depending on the city that the property is located.
It´s mandatory to all employees hired by a Brazilian company, under a progressive table, that varies from 7,5% - 14%, caped at a limit (update regularly), based on the current minimum wage.
Also, there is a portion paid by the Brazilian company to INSS (National Social Security Institute), at a minimum rate of 20%.
This fund was created to protect employees hired by Brazilian companies when such employees are under situations of vulnerability, such as unemployment, serious illness and catastrophes. The contribution is made directly by the BR company to this fund, without any deduction from the employee side at a fixed rate of 8% over the monthly remuneration paid to the employee.
There is no taxation over such withdrawal.
In Brazil there is no specific legislation/regulation on stock plan taxation, however, some events may be classified as taxable such as receiving shares from the a local or a foreigner company, sale shares or receiving dividends from stock while a fiscal resident in Brazil.
Before defining any type of taxation on stock plans it is very important to have a formal analysis by the Grant Thornton Brazil tax team.
