Brazil is currently ranked as sixth in size with respect to the world’s economies, and consequently, many foreign companies are looking to Brazil for a stable investment climate. Making the most of doing business in Brazil hinges on understanding the country’s complex tax laws. Brazilian tax laws are complicated and rather severe penalties are imposed for mishandling tax reporting, no matter whether the mistakes are due to malice or misunderstanding.
Understanding Brazil’s Tax Laws
Brazilian law allows for the collection of over 50 different types of taxes. The tax laws are difficult to understand and unyielding in their requirements, sometimes requiring only registrations to be made while other times requiring actual payments. The best course of action for businesses that do not specialize in Brazilian tax law is to have a highly recommended tax professional at their service. Tax lawyers and accountants, working together, can provide the best advice as to what needs to be filed and paid and when.
Double Taxation Agreement
For foreign individuals and companies, it is important to understand the tax liabilities not only in Brazil, but also back home. Brazil has double taxation agreements with 22 different countries. As unlikely as it seems, double taxation agreements can have beneficial effects for the businesses that are covered under these agreements. Many times these agreements alter the way other taxes are imposed, lessening the tax burden owed to the Brazilian government. Brazil has not, however, as of yet signed a double taxation agreement with the United States.
Common Taxes
Some of the most common federal corporate taxes assessed by the Brazilian government are the following (not including any state or municipal taxes):
- Income tax, which is 15% plus an additional 10% for all income over R$240,000, payable by all businesses registered in Brazil.
- Social contribution tax, which is 9% over a company’s net profits.
- Social welfare tax, which is approximately 0.65% to 1.65% of a company’s gross revenue regardless of whether there was any profit.
- Social security tax, which is approximately 3% to 7.6% of a company’s gross revenue, regardless of whether there was any profit.
