Income Tax in Brazil 101: The Lowdown

There’s an old saying in Danish: “There are only two unavoidable things in life: death and taxes (in this order – think: estate tax)”.

And when moving to Brazil or considering it, this is one of the first and major questions to pop up in our heads.

I mean, where are the limits and when does Brazil start wanting their cut?

How about our country back home, when do I call it quits with the tax agency there?

Or do I have to pay taxes in both countries?

Though maybe a bit confusing at first, It’s something that I’ve been through and am here to help you with.

So whether a student, permanent resident or a guest, you’ll want to heed my following words…

The “I’m Making an Income in Brazil” Rule of thumb

When I first came to Brazil on a volunteer visa, I wasn’t sure if, when and how I needed to pay tax.

The rules didn’t seem clear to me and I lived in a bit uncertainty until I figure things out.

Temporary visitors don’t pay income tax in Brazil

After some time of prodding around the rules and asking some questions, I finally figured out that anyone coming as a temporary visitor doesn’t need to worry about paying income taxes in Brazil.

So that means that if you come as a tourist, volunteer or on a student program, you only think about paying your normal taxes back home as you will be returning again (in their eyes).

Though, in some cases it will be necessary to pay taxes even though you are on a type of temporary visa, like if you are making money in Brazil for example.

This is true if you are coming on a business visa for example.

How much income tax do you pay on your income in Brazil?

When you are coming with the purpose of working, then you should count on paying Brazilian income taxes.

But tax is such a broad word and it can be a challenge to figure out how much actual take home you would have after you pay.

So here is a little explanation and tool to help you do it:

Let’s say that you land a job in São Paulo and get offered R$16,000 a month, let’s see how much would you be taking home after the appropriate income taxes are deducted.

There are two main abbreviations that you will need to learn.

First, there is a tax called INSS (Intituto Nacional de Seguro Social) and you should think of this as being a type of Social Security Tax that covers you in the case of sickness, when you retire and so on.

The INSS is calculated based on a type of step scale, where you are taxed at each stage of your income and then those taxes are added up and subtracted from your salary.

Here is the table in Portuguese:

Note: the ceiling is R$457.49

Second, is the term IRPF (Imposto de Renda de Pessoa Física), think of this as just being your personal income tax.

Your IRPF is calculated on a type of step scale like the INSS except that it has no ceiling.

Note: you get also deductions for this tax based on how many children you have.

A Cool Calculator to Figure out Your Taxes Instantly

There is a tool (in Portuguese) that let’s you figure out exactly how much total tax you pay so that you can find out your liquid salary each month.

It’s extremely easy to use and completely free.

Let me show you how:

(Watch How to Calculate Your Income Tax in Brazil on YouTube)

Summary:

  1. I went to www.calcule.net and clicked on Sálario Líquido on the side bar.
  2. I then entered R$16,000 into the income field (written R$16.000,00 in Portuguese – switch the comma and period around).
  3. I then explained how the calculator functions and how you can figure out your own income.
  4. I show you another fun BBQ calculator!

Note: I figured out what I did wrong, you have to click on the “X” so it is a green checkmark and then the BBQ calculator will work!

See this picture:

Switching from Paying Tax in one Country to Another

Some people can switch paying taxes from one country to another.

These countries have a type of double tax treaty between them and Brazil, which allows you to either only pay income tax in Brazil or get a credit for it.

Though, some countries do not have a tax treaty with Brazil and may not recognize you earning an income abroad and require you to pay tax in your home country.

Figuring out if your country has a tax treaty with Brazil or not:

  • Go to this website and see if your country is on the list.
  • If your country is on the list, then contact your local tax authority or read online about what kind of tax treaty is in place.

Note: the USA has no tax treaty with Brazil but you can get a foreign tax credit on income earned while living abroad!

For example: a Citizen of a European country like Denmark will be able to benefit from a double taxation treaty, but there are certain rules and restrictions about how much you get credit for etc.

Currently, Denmark will give you credit on the tax you pay in Brazil and since the tax rate is higher in Denmark, you pay the remainder to them. (in essence: you pay the same tax in Denmark as in Brazil).

So make sure to check with your tax people to make sure what the rules are.

When do you Flip the Switch and Pay Income Taxes in Brazil

Usually this is pretty straight forward and easy “when you make money Brazil”, but there can be some cases where it is pretty unclear about what to do.

Let’s say that you get married to a Brazilian or have a Brazilian child.

When you apply for the visa from within Brazil, it can take years (no joke) for the actual permanent visa to get approved.

And in the mean time, you will either be living off some savings, being a “stay at home” or getting a job in Brazil.

You are considered a resident and taxable from Brazil after 183 of residence in Brazil.

And yes, you can legally get a job in Brazil while being on “Protocolo” (when your permanent visa is being processed) – I’ll cover that in another post.

But when you get your job in Brazil, even though on protocol, you will be looked at as a resident and then pay taxes as if you were one.

Note: if you aren’t residing in Brazil but making an earning, you still need to pay taxes but they are less (usually from 15-25%).

How do you Flip the Switch and Pay Income Taxes in Brazil

When the time comes to flip the switch and you are ready to pay income tax in Brazil, there are a few things to take into consideration:

1: Each country is different about when you “flip the switch”

Some countries make you wait a certain amount of months, then you prove that you live abroad, other’s just want you to inform them about it.

Either way, this is all done through your tax authorities so I bet you can guess what I’m about to recommend you do: contact your local tax authority to find out “what’s required to make the switch”.

2: You may still need to report your income to your home country

If you are a resident of the USA, you will need to declare your international income each year during tax season regardless if you are a resident or not.

This is when they would apply a double taxation credit in another country.

No matter what though, make sure and check to figure out what you are required to by your tax authority each year, even though you are living abroad or you could be walking into a storm when you come back…

Final Words

I hope that this was helpful in giving you an overall idea of what to expect when living and paying income taxes in Brazil and thanks to the tool above, you should have a pretty good idea of how to figure out how much you would be and how that works.

If you found the video tutorial helpful above, please make sure that you subscribe to my YouTube channel by clicking here.

Looking forward to helping you more next time!

Valeu – Cheers,
Kevin


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5 Comments

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  • Kevin,
    I have been in Brazil for 130 days this year on a business (not work) visa. I don’t earn any income in Brazil, only in the United States, where my job is actually based. My installation team in Brazil based, but I am just here to interact with them. I recently married a Brazilian, making me eligible to apply for a permanent visa, under the pretense (or reality perhaps) that I plan to stay here. If I apply here in Brazil, I understand it can take 18-24 months to process, during which time I am on protocol. If I exceed 183 days while on protocol, I understand I am not overstaying my visa, since I am on protocol. My question is, do I still have to start paying tax after the 183rd day even though I am really still on a temporary visa?
    -C

    • Found this information on this website: http://internationalliving.com/countries/brazil/taxes, which may be helpful to you. I would contact an accountant:

      Residency

      An individual is considered a resident of Brazil when he or she is holding a permanent visa, or a temporary visa with an employment agreement. An individual is a resident without an employment agreement when staying in Brazil for more than 183 days within 12 months. A foreign company is a resident if it was incorporated in Brazil or has local activity.

      Foreign nationals who are tax-resident in Brazil are required to pay tax on their Brazilian and overseas-generated income, unless covered by a Double Taxation Treaty between Brazil and their home country, and must file an annual tax return every April. Foreign nationals become subject to tax-residence status if they stay in Brazil for more than 183 days in any 12-month period, and this status applies for 12 months after their last departure from Brazil.

      Foreign nationals who are not tax-resident are required to pay tax only on their income from Brazilian sources, at a rate of 25% on earned income and 15% on unearned income. They do not have to file an annual tax return.

      Individual Income Tax
      Brazil has a progressive personal taxation system under which individuals are taxed up to a maximum of 27.5% of their income.

      The Brazilian fiscal year begins on Jan. 1 and ends on Dec. 31. The rate is progressive from 0% to 27.5% and shared out into three brackets. These taxation brackets apply to monthly income amounts, on a yearly basis.

      There are several types of reductions available for taxpayers in Brazil depending on the regime of the declaration and whether it is simplified or complete:

      Payments made for educational expenses, up to an annual limit of BRL2,198 ($1,266)

      Brazilian Private Pension Plan contributions, up to 12% of gross income

      Social security rates
      Donations, certain school fees, medical expenses, etc. (20% maximum of the global annual income).

      Self-employed people can deduct expenses when calculating their income for tax purposes.

  • Hi Kevin,

    Thank you, your article was helpful to read. Can you confirm that I am understanding this correctly as I apply to my situation please?

    – I married a Brazilian last year and have permanent residency in Brazil this year 2015 (living here the year)

    – income is solely US based

    Without a Double Tax Treaty between the U.S. And Brazil, it looks like it is required to pay taxes in both countries— ie, US taxes already come out of each paycheck and when filing US taxes, eligible for “credit” to reduce the amount owed in US based on taxes paid in Brazil at 27% of income.

    • I believe you probably do need to pay tax in both countries. I don’t have any US based income so never had to do that – fortunately! What I will say is that the USA is probably the worst country in the world to have citizenship in if you want to live abroad… You should definitely find an accountant who can help you work it all out.

  • Have you ever heard of a case where the RF is going after tourists who overstay? There are all these new rules nowadays. Let’s say you are a digital nomad, and have a CPF in Brazil, may be you bought RE and/or have a bank account onto which you send wire transfers to yourself every now and then. Ever heard of a tourist being scrutinized? Since 2014 also, they have signed bilateral agreements between Brazil and USA to implement data exchange, which is kicking in in 2016 or 17. What have we heard about that as it might impact the mere tourist?

    Let me give some information rather than just asking questions. A resident for tax purposes is defined in Brazil similar to the USA with similar consequences. By the books, if you are physically present in Brazil for more than 183 days in any 12-month period, you are a resident for tax purposes, no matter what your immigration status is. That is by the books, and if playing digital nomad becomes more and more popular in Brazil, the ever hungry state that needs to keep funding the payroll of the politicians will want to tap that potential source.

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