Expatriate tax - Brazil

Foreign citizens may enter the territory of Brazil with or without visa (depending on nationality) and there is no nationality restriction. As a rule, foreign citizen, even if non-residents, can have a CPF card - a personal identification number for individuals. The registration can be done online at the Brazilian Tax Authorities website.

Foreign citizen holding a visa with labor contract in Brazil are obligated to obtain a CTPS – a work permit that proves data about the functional life of the worker. Non-applicable for visa without a labor contract in Brazil.

The tax residency condition depends on what type of VISA the individual is holding and when this condition is acquired.

Below, please find some type of VISAs as well as the time the Brazilian residency condition is acquired.

The Brazilian legislation provides to foreign citizen different types of visas that sets the residence acquisition in the country, as below:

There are available other types of VISA, however they are not usual for expatriates.

The Brazilian tax year is from 1 January to 31 December.

Brazilian residents and those expatriates that have become Brazilian tax residents by residing in Brazil for 183 days or more, must file their Annual Income Tax Return (DIR) before 30th April of the following year of residency acquisition year and Declaration of Brazilian Capital Located Abroad (CBE) before 5th April (if applicable).

The Annual Income Tax Return is applicable for all the residents, being applied the Brazilian Progressive tax table (Tabela Progressiva) based on the received annual amount, as per showed in the following table.

Sample income tax calculation – Tabela Progressiva

The tax return can be delivered in two different models. The complete model is more applicable for those who have dependents and deductible expenses. The other tax return type is the simplified type that allows the taxpayer to have up to 20% reduction on the sum of all taxable income received during the year limited to R$ 16.754,34. This type of return is common for single taxpayers with no deductible expenses.

Tax returns may result in refunds or payments. To receive the refund, it is necessary to have a personal Brazilian bank account. In case of the tax return result in tax payment, it can be done through a bank voucher (DARF).

The Declaration of Brazilian Capital Located Abroad (CBE) is applicable in case of the individual owns assets abroad in a total amount equal or superior to USD 1.000.000,00 by December 31st of the year the residency condition was acquired.

Taxation in Brazil is based at source by the employer according to the below:

Taxation occurs when…
All income is considered taxable in Brazil – be it sourced in Brazil or in other countries. The charge of taxation will be determined by an individual’s tax residency status.

Determining Tax Residency
Taxation of individuals in Brazil is determined by their residency. Income is taxed at the source of their earnings. A person is a resident in Brazil for tax purposes if:

• they have permanent residence;
• they are Brazilian citizen, serving at the capacity of consular, diplomatic or at another similar function, outside the territory of Brazil;
• the individual live in Brazil for at least 183 days during a tax period, regardless of his/her nationality. The calculation of the residence period in Brazil includes all the days of physical presence, not only business days, but also holidays;
• they are holding a work/permanent visa type.

Expatriates considered as Brazilian tax residents, are taxed on their worldwide income and gains (rent, interest, dividends, capital gains). Income from abroad is subject to taxation - the payment of the tax is employee’s obligation through the Carnê-Leão, a Monthly Income Tax Calculation on the worldwide income according the table below:

According to the Brazilian Federal Revenue, it is possible to apply for some tax deductions being them: dependents (must have CPF number), tuition and medical expenses, alimony and private pension plans.

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.

According to the Brazilian income tax code, capital gains are taxed at the tax rate range from 15% up to 22.5%.

The sale of assets acquired before becoming a fiscal resident is exempt of this tax.

Inheritance, estate and donation are considered an exempted income for the Income Tax Return with the limit of R$ 79.925,00 (to CY 2022), above this value the tax can reach up to 4%, but the tax vary from state to state, but the tax rate maximum to be paid is 4% – though they must be reported on income tax returns in Brazil. Donations made over the limit are subjected to the ITCMD – a local state tax over the received donations. It is determined by the state of residence.

Investment income in Brazil is taxed by an exclusive tax rates and taxation are done at source.

Income from investments from abroad are subject to monthly income tax calculation – carnê leão.

There are no other local taxes on income in Brazil.

There is no real estate tax in Brazil.

Employees are obliged to pay social security contributions on gross salary, which is withheld in Brazilian payroll with rates as follows:

Employers and employees contribute a percentage of the calculated monthly salary to a social security fund. The maximum social security amount can be discount in employee’s payroll is BRL 828,39.

Social security contribution rates and amounts are subjected to change every year – the above-mentioned table is considered for 2022.

FGTS is a working time guarantee fund created to protect employees that are dismissed from companies in Brazil. This fund binds with the employment contract, at the beginning of each month the employers contribute with 8% based on employee’s gross salary to the fund. There is no deduction from employee’s side. This is an employer’s obligation.

The FGTS can be withdrawn by the worker in case of some requirements are attended, but the most common are to use the money to buy/finance a house or in case the employee leaves the country.

There are no specific rules or legislation in Brazil for the tax treatment of employer-provided stock plans. Stock options are subject to personal income tax through capital gain at the moment of exercising.

RSU taxation is dependent on grant x vest periods - by the time the RSU is vested to the employees, it must be reported on the Annual Income Tax Return as an income taxed by the Tabela Progessiva. RSU’s must be also included as an asset in the tax return. If sold with gain they will be subject to capital gain calculation.

Before defining any type of taxation on stock plans it is extremely necessary for them to be studied by the Grant Thornton Brazil tax team – each company has different stock plans that have distinct impacts on taxation.

When an individual leaves Brazil on a permanent basis, the tax resident is obliged to present a Departure Process.

This process consists in the filing of two documents with the Brazilian Tax Authorities: Communication of Definitive Departure and the Departure Income Tax Return.

The Departure Tax Return process is concluded in the months of March/April – subsequent year of the departure.

The tax payer will no longer be linked to the Brazilian Tax Authorities and any income sourced in Brazil must respect the applicable nonresident tax rate.

The tax payer number (CPF) is not cancelled and can be used normally in case of investments in Brazil or future trips to the country.