You will be 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? It is important to understand how your US expat taxes are going to change with your move to Brazil, and to understand how you will be taxed by Brazil while residing there.
US Expat Taxes in Brazil
If you are a citizen or permanent resident of the United States 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 international 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 $100,800 of foreign earned income from your 2015 US taxes (and $101,300 from your 2016 US taxes),
- The Foreign Tax Credit, which allows you to offset the taxes you paid in your host country with your US expat taxes dollar for dollar, and
- The Foreign Housing Exclusion, which allows you to exclude certain household expenses that occur as a result of living abroad.
With proper planning and quality tax preparation, you should be able to take advantage of these and other strategies to minimize or even eliminate your US expat taxes. Please note that even if you do not believe you will owe any US income taxes, you will more than likely still be required to file a return.
Who is a Brazilian Resident?
In Brazil, you are considered a resident from the moment you arrive if you are the holder of a permanent visa or temporary work permit. If you come to Brazil for other reasons and are in the country for more than 183 days (consecutive or not) in a 12-month period, you will also be considered a resident for tax purposes as of the first day that exceeds the 183-day period.
Need help filing your US expat taxes while living in Brazil? Get started on your US expat taxes with the experts at Greenback. Click here to get matched with an accountant to review your individual situation today and confirm what you need to file.
The Brazil Income Tax Rates
If you are a Brazilian resident, your worldwide income will be subject to personal income tax at a progressive rate that peaks at 27.5%. If you are a non-resident, you are responsible for taxes only on Brazilian income, and you are not required to even bother filing an income tax return until you become a resident.
For residents paying tax on worldwide income, the tax rates for 2015 are as follows:
|Earnings in Real (BRL- R$)||Rate Applicable to Income Level (%)|
|21,454.24 to 32,151.48||7.5%|
|32,152.48 to 42,869.16||15%|
|42,870.16 to 53,565.72||22.5%|
|53,566.72 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%).
As of January 1, 2016, for residents, capital gains are taxed at:
- 15% on earnings that do not exceed BRL 1 million
- 20% on earnings that are between BRL 1 million and 5 million
- 25% on earnings that are between BRL 5 million and 20 million
- 30% on earnings that exceed 20 million
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.
There are some capital gains that are exempt from tax, including unique real estate (that does not exceed R$440,000), sale of assets with prices of less than R$35,000/month, amounts from the sale of securities on the public stock exchange for less than R$20,000, or proceeds from real estate if they are re-invested in another real estate property within 180 days.
US – Brazil Tax Treaty
The US and Brazil recently entered into a Totalization Agreement in 2016, which eliminates double contributions of social security taxes. Read more about this new social security agreement.
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 an annual 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 on a monthly basis, 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 sort of 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 tax of 4%.
- Brazil has a tax similar to the value added tax (VAT) established in most countries, which in Brazil is called the ICMS. A general rate of 18% applies (for in-state circulation), as well as specific rates for certain goods (such as a 25% rate on luxury goods).
Saving on US Expat Taxes
With the many various forms of taxation that are applied to foreign nationals working and residing in Brazil, it is important that you apply all of the exclusions, deductions, and credits to your US expat taxes. 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 in order to make filing taxes a more hassle-free process, so you can get back to your adventure abroad!
Originally published in 2012; updated July 29, 2016.