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Individuals in Brazil are subject to a number of taxes, including personal income tax, social security tax and gift and inheritance tax. Capital gains are subject to a flat 15% rate. There is no local or state income tax for individuals.

Tax is paid on a monthly basis either through withholding from salaries or by advance payment for the self-employed. Monthly advances are required for income received outside of Brazil by Brazilian tax residents. All residents who are subject to income tax must prepare an annual tax return.

Personal taxes are calculated and paid based on income earned in the tax period. Three rates of personal tax are imposed:

•           0% on annual income up to BRL 16,473;
•           15% for income of BRL 16,473-32,919; and
•           27.5% for income exceeding BRL 32,919.

The following individuals are considered residents for tax purposes: (1) an individual who resides permanently in the country; (2) naturalised foreigners; (3) foreigners who hold a permanent visa or a temporary visa with a local employment contract, from the date of arrival; and (4) foreigners who hold a temporary visa but no local employment contract, after completing 183 days of residence in Brazil in any 12-month period.

Residents are taxed on worldwide income, with a foreign tax credit for taxes paid in the country of origin (subject to bilateral reciprocity). Nonresidents are taxed on their Brazilian- source income at a flat rate of 25% (on earned income) or 15% (on other income except dividends paid from a Brazilian entity, which are tax exempt). The source of income is determined by the location of the income payer, regardless of where the work is performed.

Taxable income and rates

Determination of taxable income
Residents are taxed on their gross income, which includes both domestic and foreign-source income, with a foreign credit for taxes paid abroad. Gross income is taxable whether received in cash or in-kind. Taxable income includes wages, salaries, bonuses, consulting fees and commissions, premiums, directors' fees, and interest and dividends from foreign sources. It also includes most allowances connected with employment, including housing allowances and allowances for home leave provided by an employer. Schooling allowances are considered indirect salary and taxed accordingly. No distinction is made between personal expenses paid directly by the company or those reimbursed to the individual. Moving expenses, however, are generally non-taxable.

The formal profit sharing paid by a Brazilian employer to its employees can be exempt only for INSS (social security) and severance fund purposes. For withholding income tax purposes, the profit sharing is taxed at progressive rates ranging from 0% to 27.5%. Dividends received from local sources are tax exempt.

Taxpayers may deduct certain expenses when calculating monthly income tax liability and other expenses when they file their annual federal income tax return. Deductions permitted in calculating monthly income tax liability include the following:

  • Social security taxes paid by the employee to federal, state or municipal entities;
  • Contributions to private Brazilian pension plans, up to 12% of gross income, provided contributions are also made to the official social security.
  • Alimony or pension payments under a court order (special limits apply for alimony paid to beneficiaries resident abroad); and
  • A standard monthly deduction of BRL 126 per dependent.

The following deductions may be taken when the annual return is filed:

  • Payments by the taxpayer or a dependent for educational expenses, up to an annual limit of BRL 2,492;
  • Payments made and not reimbursed during the year for medical or dental expenses, health insurance plans, or psychotherapy or physiotherapy; and
  • Documented contributions to approved Brazilian cultural, artistic and audiovisual activities and donations to Brazilian Child and Youth Counsels, up to 6% of taxable income.

Instead of itemizing deductions, the taxpayer may elect the standard annual deduction of 20% of taxable income up to a maximum of BRL 12,194.

Special expatriate tax regime
There is no regime that specifically applies to expatriates. 

Capital taxes
There are no capital taxes.


Source: Deloitte

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