For foreign professionals who visit Brazil annually, the reality of our tax system is still a challenge. As provided for by current legislation, foreigners working in Brazil must report their income to the Federal Revenue, with the effective taxation of their earnings in the country.

For the correct taxation of expatriate income, and for the maintenance of compliance in the country, it is necessary to observe some important points. To learn more about expatriate taxation in Brazil, getting to know its main aspects and risks involved, read on.

Taxation of expatriates in Brazil

For there to be an obligation to tax income in Brazil, two principles must be observed. The principle of territoriality establishes that income earned within the territorial limits of the country, by residents or non-residents, is taxable. The principle of universality, on the other hand, establishes that the government can tax the income of residents in its territory, regardless of where the taxable event occurs.

Strictly speaking, the need to report to the Federal Revenue Service occurs when there is a period of residence equal to or greater than 184 consecutive days in 12 months. It is important to point out that the requirement does not depend on obtaining a permanent visa, as long as the minimum period of activity in the country is met – even if the entry into the country has taken place for any other reason.

For foreigners officially residing in Brazil, global income will be subject to personal income tax at a progressive rate that reaches 27.5%. For non-residents, who nevertheless stayed here for a period equal to or greater than the limit of 184 days in the last 12 months, taxation will be levied only on income obtained in the country, at the rate of 25% – without prejudice to the possible incidence of the ISSQN on services provided, which has a municipal character and whose rate varies from 2% to 5%.

From the point where there is this obligation, the rules for calculating and reporting income tax are the same applied to Brazilian citizens. Therefore, foreign residents need to be aware of the economic facts that are taxed in Brazil. Due to the move to the country, it is common for companies to offer benefits such as housing assistance.

What is taxed in Brazil

As established by Brazilian law, any indirect salaries granted by the company to officers, directors, managers and their advisors, such as additional benefits and advantages arising from positions, functions or jobs, are also taxed.

In cases where the expatriate earns income abroad, in addition to declaring the Income Tax, it will be necessary to make monthly payments through the “carnê-leão”. For this, the calculation basis must consider the totality of the income received, based on the progressive table and the rules applicable to the exchange rate.

Another important point to note is the withholding tax. Pursuant to current law, payments made to non-residents will be subject to withholding tax at the rate of 25%, when intended for individuals – unless a treaty against double taxation is in force.

Avoiding double taxation

Currently, Brazil has treaties to avoid double taxation with Argentina, Austria, Belgium, Canada, Chile, China, South Korea, Denmark, Ecuador, Spain, Philippines, Finland, France, Netherlands, Hungary, India, Israel, Italy, Japan, Luxembourg, Norway, Portugal, Czech Republic, Slovakia, Sweden and Ukraine.

In 2016, the US and Brazil entered into a Totalization Agreement in 2016, which eliminated double pension tax contributions. Foreign residents working in Brazil, however, are still subject to national income taxation rules.

Expatriate taxation: a Gescon specialty

Gescon’s tax consultancy area is prepared to deal with all aspects of taxation of expatriates operating in Brazil.

We act strategically to ensure the optimization of the tax burden of our expatriates, strictly following current legislation and keeping compliance up to date.

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