You are required to file US expat taxes no matter which country you live in, but how will they be affected if you’ve chosen to live in beautiful Brazil? Understanding how your US expat taxes are going to change with your move to Brazil is crucial. Find out what expats need to know.
US Expat Taxes in Brazil
If you are a citizen or permanent resident of the US and you live overseas, you are obligated to file US taxes with the IRS each year. In addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts with the Foreign Bank Account Report (FBAR), also known as FinCEN Form 114.
While the US taxes the worldwide income of its citizens and permanent residents who reside overseas, it does have special provisions to help protect them from double taxation, including:
- The Foreign Earned Income Exclusion, which allows you to exclude up to $105,900 of foreign earned income from their 2019 US expat taxes and $107,600 for 2020,
- The Foreign Tax Credit, which allows you to offset the taxes you owe to the US with taxes you paid to your host country, dollar for dollar, and
- The Foreign Housing Exclusion, which allows you to exclude certain household expenses that occur as a result of living abroad.
With proper planning and quality tax preparation, you should be able to take advantage of these and other strategies to minimize or eliminate your US expat taxes. Please note that even if you do not believe you will owe any US income taxes, you will more than likely still be required to file an informational return.
Who Is a Brazilian Resident?
In Brazil, you are considered a resident from the moment you arrive if you are the holder of a permanent visa or temporary work permit. If you come to Brazil for other reasons and are in the country for more than 183 days (consecutive or not) in a 12-month period, you will also be considered a resident for tax purposes as of the first day that exceeds the 183-day period.
Need help filing your US expat taxes while living in Brazil? Get started on your US expat taxes with the experts at Greenback. Click here to get matched with an accountant to review your individual situation today and confirm what you need to file.
The Brazil Income Tax Rates
If you are a Brazilian resident, your worldwide income will be subject to personal income tax at a progressive rate that peaks at 27.5%. If you are a non-resident, you are responsible for taxes only on Brazilian income at a rate of 25%, and you are not required to file an income tax return until you become a resident.
For residents paying tax on worldwide income, the tax rates for tax year 2018 are as follows:
|Earnings in BRL||Rate Applicable to Income Level (%)|
|22,849 to 33,920||7.5%|
|33,921 to 45,012||15%|
|45,013 to 55,976||22.5%|
|55,977 and above||27.5%|
There are no regional or state income taxes in Brazil, though some municipalities will levy a service tax on businesses or real estate transfers (usually 2%).
Taxpayers are not able to apply their losses against their other income but have been able to net gains and losses from sales of securities on a Brazilian public stock exchange.
US – Brazil Tax Treaty
The US and Brazil entered into a Totalization Agreement in 2016, which eliminates double contributions of social security taxes.
Brazil Tax Due Date
For corporate taxes, the fiscal year is the tax year. For individual income taxes, the taxable period is any given calendar month. You will also be required to file an annual tax declaration, with the tax rates being calculated to a yearly average to make up for any fluctuations in monthly income. These returns must be filed by the last working day of April in the year following the tax year. Although payments are withheld every month, taxpayers must pay annual taxes on income not subject to withholding, such as investments.
Is Foreign Income Taxed Within Brazil?
If you are considered a resident of Brazil, your foreign income will need to be reported, and taxes will be levied on that amount. If you are not a resident, you are not required to pay taxes to Brazil on foreign income.
Other Taxes in Brazil
In addition to income tax on salaries paid, there are other forms of income that are taxed in Brazil.
- Non-cash compensation is considered taxable, including housing allowances, any services that were provided, or company cars.
- Brazil does not impose any inheritance or wealth tax. However, certain states can choose to impose a gift, death transfer, or donation tax. An example of such a state is Sao Paulo, which imposes a gift or inheritance.
- Brazil has a tax similar to the value-added tax (VAT) established in most countries, which in Brazil is called the ICMS. A average rate of 17% applies, as well as specific rates for certain goods (such as a 7% rate on food).
Saving on US Expat Taxes
With the many various forms of taxation that are applied to foreign nationals working and residing in Brazil, applying all of the exclusions, deductions, and credits to your US expat taxes is essential. Brazil is neither a tax haven nor a high-tax destination, but understanding your filing obligations will help minimize your taxes – both in the US and Brazil.
Questions About US Expat Taxes in Brazil?
Our team of expat-expert CPAs and IRS Enrolled Agents can help. Contact us today for the expat tax advice you need to make filing taxes a more hassle-free process so that you can get back to your adventure abroad!
Originally published in 2012; updated March 2020.