Brazil

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
The liability to taxation in Brazil is determined mainly by the residency status of the indivudual. Brazilian residents are taxed on their worldwide income. Non residents are taxed on their Brazilian-source income only.

Residence
An expatriate is considered resident for tax purposes if he/she enters the country with the intent to stay. Those entering Brazil with a permanent visa are deemed to be permanent residents for tax purposes from the date of their arrival. Expatriates arriving in Brazil with a temporary work visa will also be considered residents for tax purposes.

In other cases, when the intent cannot be assumed, the time spent in the country will be used to determine the tax status. An expatriate will be considered a tax resident in Brazil if he or she has remained in the country for at least 184 days within a twelve month period.

A Brazilian tax resident who intends to leave the country must file a Communication of Definitive Departure as well as file the Definitive Departure Tax Return in order to end the tax residence in Brazil and its tax obligations as well.

 

Income from employment
Taxable employment income generally includes salary, wages and any other type of compensation and benefits received by an expatriate. Individuals must make payment of their annual income tax on a monthly basis either:

• as a withholding income tax, assessed on income paid by companies; or
• as a compulsory monthly pay-as-you-earn system, known as “Carnê Leão”, on income received from other individuals or from sources outside of Brazil.

Source of employment
Where an expatriate is a Brazilian tax resident and performs employment duties in Brazil, any compensation received in respect of these duties will be treated as Brazilian-source income.

Benefits (in kind)
All employer benefits provided to an expatriate will be subject to tax.

Expatriate concessions
There are no expatriate concessions in Brazil.

Foreign tax offset
Brazil has treaty for avoiding Double Taxation with many countries, including the United States of America, with which there is reciprocity agreement.

A double taxation treaty, in principle, enables offsetting federal tax paid in one of the two countries against the tax payable in the other, in this way preventing double taxation.

Deductions against income (2010 Tax return)

Some expenses are deductible from the gross income for the computation of the Annual Tax Return medical expenses, school expenses.

Allowed deductions include:

· annual amount of R$ 1,730.40 per dependent (spouse and child)

· social security taxes paid to the Brazilian government;

· educational expenses up to an annual limit of R$2,708.94 per student (taxpayer or dependents);Brazilian private pension plan contributions, up to 12% of gross income;

· Social security taxes paid for domestic maid up to an annual limit of R$732.00;

· medical expenses are fully deductible or its portion not reimbursed by the health plan

· married persons may report their income separately or in a joint return.

Information about Brazil:

introduction

facts and figures

basis of taxation

what taxes?

tax planning opportunities