As the April 30th income tax deadline approaches, Brazilians and foreigners prepare to declare their annual income to the Receita Federal (Secretariat of the Federal Revenue of Brazil). Both Brazilian citizens and foreigners considered to be tax residents who earned more than R$24,556.65 in 2012 are required to file the Imposto de Renda Pessoa Física (IRPF – Personal Income Tax).
For the first time, the Receita Federal is allowing taxpayers to file their income taxes from their smartphones and tablets as an added level of convenience. Also, taxpayers can now make charitable donations to social causes when they file their taxes. Those who choose to donate will receive a 3% tax reduction.
Foreigners Must Be Aware of Their Income Tax Obligations in Brazil
The number of foreigners, or resident aliens, entering Brazil with a work visa rose 3% in 2012, with more than 70,000 work visas issued. It is important that each of these individuals understand that their tax obligations in Brazil may differ significantly from what they are familiar with in their home country.
Whether foreigners must pay income taxes in Brazil is based on the determination of whether they are tax residents of Brazil. There are several circumstances that would give foreigners tax resident status. That’s why it is important for foreigners to seek professional tax advice.
Foreigners are considered to be resident tax payers if they meet any one of the following criteria:
- Naturalized foreigners
- Foreigners who hold a permanent visa
- Foreigners who hold a temporary visa with a local employment contract
- Foreigners who hold a temporary visa but who have been in Brazil for at least 184 consecutive or non-consecutive days within a 12-month period
- Foreigners who are employees of the Brazilian government
When declaring their annual income, foreigners can use the same filing statuses as Brazilian citizens. They can also claim the same personal and dependency deductions, including deductions for medical expenses, dental expenses, and tuition for education.
Foreigners Are Also Taxed on Income Earned Abroad
What is surprising to most foreign resident tax payers is that all of their income is subject to taxation, even if it was earned outside of Brazil. This rule also applies to capital gains income on investments and assets anywhere in the world. Tax residents must report all overseas assets so that the income from those assets can be properly taxed.
Living and working in Brazil may result in tax obligations for which foreigners must be prepared. For more information about Brazil’s progressive tax rates, as well as reporting and filing obligations of resident tax payers, visit the website of the Receita Federal.
