By Maria Lopez Conde, Contributing Reporter
RIO DE JANEIRO, BRAZIL – Both Brazilians and foreigners are preparing to declare their annual income as the April 30th deadline to file taxes with the Receita Federal (Federal Revenue) nears. Under Brazilian law, all Brazilian citizens who received an annual taxable income above R$24,556.65 in 2012 are required to file the Imposto de Renda Pessoa Física (IRPF – Personal Income Tax).
Foreigners who are considered tax residents are also obligated to file income taxes, explained Bernardo Mira, partner at Pacific Global Mobility Services, a Rio-based consulting company specializing in tax and immigration laws.
“Foreigners who enter Brazil with a permanent or temporary work visa become tax residents upon arrival in Brazil,” Mira affirmed. “Those who enter Brazil without a work contract can also become tax residents,” Mira added.
Non-nationals who have been in the country for 184 consecutive or non-consecutive days over a twelve-month period are also required to file taxes. This includes technicians who work aboard ships and on off-shore oil platforms. Employees of the Brazilian government abroad are also required to file income taxes even if they are not Brazilian.
These rules apply to the rising number of foreigners who have arrived to work in Brazil. In 2012, over 70,000 work visas were issued, a 3.5 percent increase from the year before.
In order to file taxes, tax residents should first apply for a taxpayer card, known as a CPF, short for Cadastro Pessoa Física (Natural Person Register) with the Receita Federal. This is a unique identification number that stores a person’s credit history, similar to a U.S. Social Security number, and is needed in most financial transactions, like opening a bank account.
If a foreigner is a tax resident, his or her income is subject to taxation, even if it proceeds from a foreign source. This is applicable to capital gains that result from assets either in Brazil or abroad, which usually shocks Bernardo Mira’s clients at Global Pacific.
“Foreigners always get surprised when we inform them that it is mandatory to report revenue and assets located overseas,” Mira said. “We always explain that these are not taxed in Brazil; only the income generated by those assets is taxed.”
The taxes levied on these can be calculated on the Receita Federal’s website and should be paid through mandatory monthly payments via the Carnê Leão program.
Additionally, it is mandatory for tax residents who have assets totaling an amount higher than or equal to US$100,000 overseas to file the Brazilian Central Bank’s Assets Report from February 15th until April 5th, which is included in income tax declarations. Foreigners can also expect to pay the same deductions Brazilians pay for education, medicine, health and social security expenses.
Brazilian income taxes are progressive, as in the United States. The scale begins at 7.5 percent and ends at 27.5 percent, taxing those who make above R$4,271.59 per month at the same rate as those who earn R$30,000 per month. Non-compliance with the notoriously complicated Brazilian tax law can result in fines that range from R$165.74 to up to twenty percent of the owed taxes.
This year, the Receita Federal announced it will offer taxpayers the ability to file their income taxes from their smartphones and tablets for the first time, as well as the opportunity to donate to social causes automatically, an action which could result in a three percent tax reduction.
As of April 1st, the Receita Federal had already received over nine million income tax declarations out of the over 26 million filings it expects to receive by the end of April. This represents a modest increase from 2012’s 25 million declarations (in a country of approximately 192 million).