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