Simple Tax Guide for Americans in Brazil
At Taxes for Expats we have been preparing U.S. taxes for Americans in Brazil since 2004. Our clients hail from all parts of the country - Rio and Sao Palo, Salvador and Brasilia, Fortaleza and Belo Horizonte.
US Expat Taxes - Brazil
Regardless of where you live, you need to file United States expat taxes. But, what details are important if you’ve decided to take up residence in the beautiful country of Brazil? Brazil’s carnivals and beautiful beaches draw many people, but US expats must understand how expat taxes get impacted when you relocate to Brazil, plus understand how Brazil will tax you while living there.
US citizens, as well as permanent residents, are required to file expatriate tax returns with the federal government every year regardless of where they reside. Along with the typical tax return for income, many people are also required to submit a return disclosing assets which are held in bank accounts in foreign countries by using FinCEN Form 114 (FBAR).
The United States is among only a few governments who tax international income earned by their citizens, as well as permanent residents, residing overseas. There are, however, some provisions that help protect from possible double taxation. These include:
- The Foreign Earned Income Exclusion. This exclusion allows one to exclude USD 101,300 (this amount is for 2016 taxes) in earned income from foreign sources.
- A tax credit allowing tax on remaining income to be reduced based on the taxes paid to foreign governments.
- An exclusion on foreign housing that allows additional exclusions from their income for some amounts paid to cover household expenses due to living abroad.
Preparing a quality tax return following proper tax planning should allow one to use these, as well as other strategies, in minimizing or possibly eliminating tax liability. Note that in most cases the filing of a tax return is required, even if taxes are not owed.
Who Qualifies as a Resident of Brazil?
If you have a work permit (temporary), or a permanent visa, Brazil considers you a resident immediately. If you are in Brazil for reasons other than this, and are there over 183 days (whether or not they are consecutive) during any 12 month span, you are also considered to be a resident from a tax perspective starting on the day after the 183 days are exceeded.
Tax Rates for Brazil
For Brazilian residents, worldwide income is subject to income tax. The rates are progressive and top out at a rate of 27.5%. For non-residents, only Brazilian income is taxed, and the filing of a tax return is not required until they become residents.
Residents who pay tax on their worldwide income are taxed at these rates (2015 rates):
|0%||On||BRL 0 - BRL 21,453.24|
|7.5%||BRL 21,454,24 - BRL 32,151.48|
|15%||BRL 32,152.48 - BRL 42,869.16|
|22.5%||BRL 42,870.16 - BRL 53,565.72|
|27.5%||Over BRL 53,566.72|
In Brazil, there are not state or regional income taxes. Some municipalities charge taxes on businesses and on transfers of real estate (usually 2%).
For Brazilian residents, taxes on capital gains get charged at these rates (2016 rates):
|15%||On||< BRL 1,000,000|
|20%||BRL 1,000,000 - BRL 5,000,000|
|15%||BRL 32,152.48 - BRL 42,869.16|
|25%||BRL 5,000,000 - BRL 20,000,000|
|30%||> BRL 20,000,000|
Taxpayers cannot offset income with losses, but can net losses and gains from securities sales on public Brazilian stock exchanges.
In some cases, capital gains can be tax exempt. These include real estate considered unique (under BRL 440,000), assets sold with prices under BRL 35,000 per month, income from selling securities on public stock exchanges for under BRL 20,000, and income from the sale of real estate when those proceeds get reinvested into other real estate within a 180 day window.
In 2016, Brazil and the United States agreed to eliminate the double contribution for social security. Both employees and the employer contribute to social security.
When Are Brazilian Taxes Due?
Corporate taxes follow a fiscal year. The calendar month is considered to be the tax period for individual taxes. Individuals must also file a tax declaration annually before the final working day in April for the previous tax year. Tax rates for the annual return are averaged to account for variations in the monthly income. Even though taxes are withheld monthly, income that is not required to have tax withheld, like investments, must have the appropriate taxes paid with the annual return.
Does Brazil Tax Foreign Income?
Residents of Brazil must report their foreign income, and taxes are levied on it. Non-residents do not need to pay Brazilian tax on their foreign income.
Along with income tax levied on salaries, other kinds of income are also taxed by Brazil.
- Compensation in forms other than cash is taxable, such as services provided, housing allowances, and company cars.
- There is not a wealth tax or an inheritance tax. But, some states do impose gift, death, and donation taxes. One state that does this is the state of Sao Paulo, with an inheritance or gift tax rate of 4%.
- Similar to many other countries, Brazil imposes a value added tax known as the ICMS. The general rate is 18% (in-state), but other specific rates do apply for certain things (e.g., 25% for luxury goods).
Minimizing Expat Taxes
Brazil has many kinds of taxation for foreign citizens living and working in Brazil, so it is vital that any applicable deductions, credits, and exclusions are applied. Brazil is not a low-tax country, nor is it an extremely high-tax country, but it is always best to minimize taxes - in both Brazil and the US - through knowledge.