A foreigner in Brazil must fulfill obligations from the moment that he or she becomes a tax resident in the country
Written by Augusto Andrade, partner and manager of Individuals at Domingues e Pinho Contadores.
The complexity of the Brazilian legislation can bring surprises and inconveniences to foreigners who are not adequately prepared to meet local rules and requirements. Therefore, when planning the departure to Brazil, the individual must consider a number of tax aspects.
In order to get around the adversities and guarantee tranquility when settling in the new country, it is valid that the expatriate consult a specialized firm that can guide and assist on the documents and declarations required.
In addition to ensuring compliance with legislation, good planning also contributes to the identification of possible tax opportunities for foreigners in Brazil, avoiding double taxation.
Tax obligations of foreigners in Brazil
The foreigner in Brazil must fulfill obligations from the moment that becomes a tax resident in our country and also when such condition ceases.
Among other cases, the individual who enters Brazil is considered tax resident in Brazil:
a) with permanent visa, on the date of arrival;
b) with temporary visa:
– to work with employment relationship, on the date of arrival;
– on the date of 184 days completed, consecutive or not, of stay in Brazil, within a period of up to twelve months.
– on the date of obtaining a permanent visa or employment relationship, if it occurs before completing 184 days, consecutive or not, of stay in Brazil, within a period of up to twelve months.
– Income Tax Return
Among the conditions of obligation to submit the Annual Income Tax Return in Brazil is the individual who acquires the condition of tax resident.
In other words, regardless of any income condition, all individuals who become resident for tax purposes in Brazil must submit an Annual Income Tax Return.
That is, all individuals who became tax resident in Brazil in 2020 are required to file an Annual Income Tax Return in 2021, relating to the period of tax residence in 2020.
– Calculation of Capital Gain Tax
The capital gain earned by foreigners on assets located in Brazil, or abroad, are also subject to Brazilian tax legislation.
The capital gain, it is worth remembering, results from the difference between the sale value and the acquisition cost of the asset or right.
Income from financial investments abroad (e.g. interest) are also considered taxable as capital gains.
– Declaration of Brazilian Capital Abroad (CBE)
The presentation of the annual Declaration of Brazilian Capital Abroad (CBE) is mandatory for foreigners who are residents and domiciled in Brazil and possess assets, goods and rights abroad that total or exceed US$ 1,000,000.00 (one million U.S. dollars on December 31 of each year).
The quarterly delivery of this declaration must be made when goods and rights abroad total an amount equal or superior to the equivalent of US$ 100 million United States dollars on March 31, June 30 or September 30 of each year.
For purposes of the CBE, the following are considered assets: goods and rights, real estate, deposits, availability in foreign currency, loans, shares, participation in the capital of foreign companies, among others.
– Communication and final exit statement
When planning to leave Brazil, the foreigner must be aware of the need to present two documents required by the Federal Revenue:
- Communication of Definite Exit from the Country: formally communicates to the agency the date of exit from Brazil, being still necessary to evaluate if the exit takes place on a temporary or permanent basis.
- Definitive Exit Declaration: directed to the declaration and taxation of the income obtained between January 1st and the effective date of exit from the foreign country.
Those obliged must submit the declaration from the first working day of March to the last working day of April of the calendar year following the exit, if it occurred on a permanent basis, or from the date of characterization of the non-resident condition, if the exit occurred on a temporary basis.
Attention to bilateral agreements
The foreigner must pay attention to treaties and mechanisms in legislation to avoid double taxation, since Brazil maintains agreements with some countries to estimulate companies and individuals to establish and mantain business in the country.
Knowledge of these bilateral agreements and the applicability in the benefit of the foreigner in Brazil can be the differential that will contribute to the viability of the actions in this country.
Consulting to individuals and companies in the management of expatriates
Programming the transfer to Brazil in accordance with the rules is essential for the foreigner to settle in the country with peace of mind and without disturbances.
DPC specialists help expatriates to identify the taxes and declarations required for their condition, analyzing the existence of the most appropriate legal practices for each case and checking the existence of agreements that avoid double taxation.
DPC also acts in the assistance to companies that employ foreign executives, since they must guide them to the fulfillment of the Brazilian tax requirements, once visa renewal of these employees is linked to the compliance with local tax rules and obligations. In addition, our team works on planning possibilities to reduce costs for the Brazilian company in the employment of expatriate workers.
Article by Augusto Andrade, partner and manager of Individuals at Domingues e Pinho Contadores