The income taxation for foreigners is based on the foreigner's residence status. Foreigners who enter Brazil on a permanent (Visto permanente) or a temporary visa in combination with a work permit (Visto temporário) are subject to income tax (IRPF - Imposto de Renda de Pessoa Física) without restrictions. This means that all their income, regardless of where in the world it has been achieved, is taxable in Brazil. The assessment period starts with the first day of entry in Brazil and ends with the registered day of definite departure.
All other foreigners are subject to income tax with the restriction that only the income achieved in Brazil is taxable.
Calculation of income tax and tax deduction
Up to 2008 the Brazilian income tax was calculated on the basis of a three-step tax rate. Since 2009 the taxation has changed to a more precise, five-step tax rate, namely 0%, 7,5%, 15%, 22,5% and 27,5%. The minimum taxable annual salary is currently around R$ 16,000. Anything below that rate is excluded from income taxes.
Non-residents of Brazil (i.e. those without a permanent or temporary visa & work permit) are taxed at a rate of 15% for any income achieved in Brazil.
The IRPF can be calculated on the website of the Ministry of Finance which is the responsible institute for Brazilian income tax.
Tax deductions in Brazil are available only in a restricted number of cases. These include education expenses, medical professionals and hospital expenses, contributions to private pension funds, alimony, and expenses related to computing self-employment income.
Income tax declarations
All tax residents who are subject to unrestricted taxation must file a Brazilian tax return. The filing deadline is the last working day of April for the preceding tax year. This deadline cannot be extended under no circumstances. A tax year equals a calendar year.
Tax declarations are usually submitted online on the website of the Ministry of Finance. Another option, which requires a small fee, is by filling a tax declaration form (Declaração de Ajuste Anual) at the local post office. However, as the internet option is very easy to handle and offers everything from tax calculations to the necessary forms, it is much more convenient.
It is not possible to file a joint tax return with the spouse. If the spouse has no own income, he or she has to be listed as a dependant on the applicant's declaration form. In any other case both partners have to file separate forms.
The V.A.T. rate in Brazil (ICMS) is usually fixed at 18% but specific rates apply to a number of goods (25% for luxury goods and 7% on basic food products). Certain products are entirely exempt from tax like fruit, vegetables, books and newspapers.
All motor vehicle owners have to pay an annual motor vehicle tax (IPVA). It has to be paid in installments at the current tax rate depending on the vehicle's value. The vehicle owner receives a letter from the Department of Transport and then has to pay the amount due at his local bank. The receipt has to be kept in the car as a certification that the annual IPVA has been paid.