By Jose Santiago
We contine with part 2 of Jose's article helping foreigners who live in Brazil understand how the tax system works. To read part 1 click the relevant link at the bottom of the article.
Tax Basics
Q. When is the tax year?
A. For income tax purposes, the fiscal year is the calendar year. However, for an individual, the taxable period is the calendar month, not the year. An annual calendar year tax declaration also is required, and the tax rates are annualized to even out the fluctuations of monthly income.
Q. How will I be taxed in Brazil?
A. If you are a tax resident your income will be subject to personal income tax (at graduated rates up to a maximum of 27.5%).
If you are non-resident, you are taxable only on income from Brazilian sources, at a rate of 25% at source (15% if unearned income). There is no tax on foreign income (i.e., income received abroad), or obligation to file an annual income tax return, until you become resident.
Q. How is tax residence determined?
A. A Brazilian national is always regarded as resident in Brazil unless he or she leaves the country permanently. If you are the holder of a permanent visa or a temporary work permit visa you will be regarded as a resident upon arrival in Brazil.
If you are not a Brazilian national and come to Brazil for any other reason you will be treated as resident for tax purposes if you stay in Brazil for more than 183 days (consecutive or not) in any 12-month period. In such circumstances your initial residence period will start on the day following the date you exceed the 183-day period.
Residence status, once acquired, continues for 12 months after final departure from Brazil unless tax clearance is obtained. This should be obtained when leaving Brazil to become a non-resident.
Q. Are there any regional or state taxes?
A. There are no regional income taxes imposed in Brazil.
Married couples are taxed jointly on all income if one spouse has no income and is listed as a dependant on the other spouse's return. In all other cases, married couples are taxed separately.
Q. What rate of tax will I pay in Brazil?
A. Graduated rates apply to all income except certain Brazilian investment income, which is subject to a flat rate. The rates are the same for married and single individuals.
Q. Can I claim a tax deduction for charitable contributions?
A. The full amount of qualified charitable contributions to approved Brazilian charities is allowed as a credit against tax liability, subject to a limit of 6% of the total tax liability.
Q. Are any other tax deductions available?
A. The following deductions are allowable for all resident individuals:
Alimony and court-ordered child support
Certain pension payments to persons over age 65
Expenses deductible in computing self-employment income
Payments made to certain medical professionals and hospitals
Education expenses (up to a limited annual amount of R$1,998)
Resident taxpayers are also entitled to a deduction for their dependents in computing monthly taxable income, and annual taxable. For 2004 this deduction is R$106 per dependent per month.
Q. I will also be paying tax in my home country. Am I being taxed twice?
A. No. A foreign tax credit will usually be claimed on your home country tax return for Brazilian taxes paid on Brazil-source income. Alternatively Brazilian source income may be exempted on your home country return. The method used to mitigate double taxation will depend on your home country's tax legislation, and the nature of any tax agreement between Brazil and your home country.
Part 3 next week...
Jose C. Santiago
Multinvest / Elite International
Licensed Attorney - Brazil
Licensed Real Estate Agent - USA
Phones: (55-11) 9348-5729 - São Paulo, Brazil
(800) 983-7060 - Miami, USA
Website: www.josecsantiagohomes.com
Skype: josecsantiago
MSN: josecordeirosantiago@hotmail.com
Previous articles by Jose:
Tax Information for Foreigners in Brazil Part 1
8 Reasons to Invest in Brazil‘s Real Estate
The Brazilian Resident Investor Program for Foreigners
Brazil: Annual Required Procedures to Keep Your CPF Number
Legal Aspects of Acquiring Real Estate in Brazil
Note: Gringoes.com is not responsible for the results of acting upon information derived from its articles. Persons in need of legal advice related to a subject discussed in any article appearing on this site should contact a lawyer who is qualified to practice in that area of law.
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