Tax Information for Foreigners in Brazil Part 4
By Jose Santiago
We contine with the fourth and final part of Joses article helping foreigners who live in Brazil understand how the tax system works. To read the previous parts click the relevant link at the bottom of the article.
Tax - Other
Q. Will I pay Brazilian tax on investments and rental income generated in my home country?
A. Residents of Brazil are subject to tax on worldwide income, although foreign tax relief is available under tax treaties, when applicable, or unilaterally under Brazilian tax laws.
Foreign tax credits are allowed in Brazil in accordance with the terms of a specific treaty. Unilaterally, a resident in receipt of non-Brazilian-source income may credit the income tax paid to the foreign countries against the Brazilian income tax on such income, provided that the country taxing the income grants reciprocal relief to its residents for Brazilian tax on Brazilian-source income. A credit for foreign taxes cannot exceed the amount of Brazilian tax on that income.
It should be noted that mortgage interest is not deductible in calculating taxable rental income.
Q. Does Brazil have a Capital Gains Tax regime?
A. Capital gains of Brazilian residents are subject to a 15% tax, which is not credited against the liability for the year. Gains from the sale of securities on a public stock exchange are subject to a tax rate of 20%. The tax is paid on a payment voucher at a bank in the same manner as tax on income not subject to withholding. Individuals are not entitled to relief for losses against other income, but are allowed, under certain limits, to net gains and losses from sales of securities on a Brazilian public stock exchange.
The following capital gains are exempt from tax:
- Gains from the sale of a unique real estate, provided that a similar sale has not taken place in the previous five years and the total value of the sale does not exceed a specified amount (R$ 440,000 in 2004).
- Amounts received from the sale of assets with a sales price of less than R$ 20,000 per month.
- Amounts received from the sale of securities on a Brazilian public stock exchange with a sales price of less than R$ 4,143.50 per month.
- Assets sold during a period of Brazilian residence which were acquired during a non-resident period.
- Non-resident individuals are generally subject to a flat rate of 15% on gains of properties located in Brazil.
Note that tax treaties could affect the tax rates described above.
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
Previous articles by Jose:
Tax Information for Foreigners in Brazil Part 3
Tax Information for Foreigners in Brazil Part 2
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
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