If you are a U.S. citizen or resident alien living or traveling outside the United States, you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States. Your income, filing status, and age generally determine whether you must file a return. Generally, you must file a return if your gross income from worldwide sources is at least the amount shown for your filing status in the Filing Requirements table in Chapter 1 of Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad (available at www.irs.gov). The IRS web site has a wealth of information available for the overseas taxpayer. Follow the ‘Individuals’ and ‘International Taxpayers’ links, or search for IRS Publication 54.
U.S. Tax Information
Internal Revenue Service
P.O. Box 920
Bensalem, PA 19020
(215) 516-2000 (not toll-free)
Phone service available from 6:00 am to 11:00 pm (EST) M-F
Upon entering Brazil, you must obtain an identity card, the national register of foreigners or Registro Nacional de Estrangeiros (RNE), at the Federal Police. Also, a work book or Carteira de Trabalho (CT) is required from the Labor Department, and a tax identification card (CPF/CIC), from the Ministry of Finance.
If you are a tax resident your worldwide income will be subject to personal income tax (at graduated rates). If you are non-resident, you are taxable only on income from Brazilian sources. There is no tax on foreign income (i.e., income received abroad), or obligation to file an annual income tax return, until you become resident. A Brazilian national is always regarded as resident in Brazil unless he or she leaves the country permanently. If you are the holder of a permanent visa or a temporary work permit visa you will be regarded as a resident upon arrival in Brazil. If you are not a Brazilian national and come to Brazil for any other reason you will be treated as resident for tax purposes if you stay in Brazil for more than 183 days (consecutive or not) in any 12-month period. In such circumstances your initial residence period will start on the day following the date you exceed the 183-day period. Residence status, once acquired, continues for 12 months after final departure from Brazil unless tax clearance is obtained. This should be obtained when leaving Brazil to become a non-resident. There are no regional income taxes imposed in Brazil.
Individuals must file their own tax returns. Married couples are taxed jointly on all income if one spouse has no income and is listed as a dependant on the other spouse’s return. In all other cases, married couples are taxed separately. Graduated rates apply to all income except certain Brazilian investment income, which is subject to a flat rate. The rates are the same for married and single individuals.
The following tax deductions are allowable for all resident individuals:
-Alimony and court-ordered child support.
-Certain pension payments to persons over age 65
-Expenses deductible in computing self-employment income
-Payments made to certain medical professionals and hospitals
-Education expenses (up to a limited annual amount)
Resident taxpayers are also entitled to a deduction for their dependents in computing monthly taxable income, and annual taxable.
To prevent double taxation, a foreign tax credit will usually be claimed on your home country tax return for Brazilian taxes paid on Brazil-source income. Alternatively, Brazilian source income may be exempted on your home country return. The method used to mitigate double taxation will depend on your home country’s tax legislation, and the nature of any tax agreement between Brazil and your home country.
All tax residents who earn in excess of a fixed amount per year must file a Brazilian Tax Return. All tax residents holding assets and investments (including shares) located abroad must also present a specific declaration to the Brazilian Central Bank disclosing such assets and investments. Failures or omissions will be subject to heavy penalties. The due date for the declaration is the last working day in May of the year following the applicable tax year. Returns must be filed by the last working day of April of the year following the applicable tax year.
Brazil has a system of monthly withholding from income. Payments must also be made by the taxpayer in respect of income not subject to withholding. In general, individuals with income that is not subject to withholding (in the case of expatriates, this includes offshore compensation, interest, dividends, rents, etc., but not capital gains) are subject to a monthly payment of income tax (carnê leão) calculated at the monthly rates. The advance payment must be paid on or before the last working day of the month following the month when the income was received. Payments are made via voucher at any commercial bank. The advance payment is credited against the liability of the annual income tax. Withholding and carnê leão are both calculated using the monthly tax rates on monthly taxable income (gross less allowances for dependents, social security, etc.). An individual may compute the tax on income subject to and not subject to withholding reduced by the tax actually withheld to arrive at additional total tax due. This computation method eliminates the duplication of the lower rates. If this method were not used, the underpayment would be due with the annual return. When the annual return is filed, the liability is determined, and the balance due can be paid in one lump sum or divided into six monthly payments. When the installment method is chosen, the first payment is without interest and the remaining five payments are subject to interest at the monthly average rate of federal treasury bonds (SELIC).