BRASIL ! Brazilian Taxes

Benjamin Franklin's famous quote "in this world nothing is certain but death and taxes" is as applicable in Brazil as any other country on the planet. Below is a listing of the major federal, state and local (municipal or city) taxes paid by most individual Brazilian residents. A complete table of all taxes and who has the jurisdiction for each is available from  the Secretariat of Revenue of Brazil [in English].


Brazilian Federal Taxes
Income Tax
— Imposto de Renda (IR)

Both individuals and companies in Brazil are subject to federal income tax.

  Personal Income Tax — IRPF 
Brazilian income tax rates for individual income are progressive and range from 7.5% to 27.5% for those liable. The minimum and maximum of each tax rate level changes each year. Income tax rates for the various levels are after allowed deductions.

Individuals can opt to figure their income taxes using one of two different methods:

1. Use the verde (green) method which allows what is tantamount to a "standard deduction." With this method, an individual can deduct a flat 25% of their income as a "standard deduction" for themselves. They may then add an additional deduction of R$ 1,730.40 (limit) for each dependent, but cannot deduct expenses for much else. Obviously, it is more advantageous for those individuals without deductions that are more than 25% of their income to use the verde (green) method.

2. Use the azul (blue) method which allows what is tantamount to "itemized deductions." With this method, an individual may add a deduction of R$ 1,730.40 (limit) deduction for each dependent as well as allowed expenses for doctors, dentists, hospitals, medical insurance as well as all other allowed deductions. All deducted items require documentation and receipts, consequently, those using this method must maintain both receipts for all itemized deductions as well as good records. Obviously, for those who have more deductions than 25% of their income, this is more advantageous than using the verde (green) method.

Again, there is a R$ 1,730.40 (limit) deduction for each dependent. Those using the azul (blue) method may deduct up to a limit of R$ 2,708.94 for some specific educational expenses deductions. Some deductions are also allowed for employee social security contributions (INSS), alimony and child support payments, and, up to a limit, some payments to private Brazilian pension plans. Some expenses for doctors, dentists, hospitals, and medical insurance are also deductible. The cost of medical laboratory tests, prescription medications and many other things that may be deductible in the U.S. and elsewhere are not deductible in Brazil.
 

2010 Brazil Personal Income Tax Rates After Deductions
———
To > R$ 1,499.15/month
§R$ 17,215/year
Exempt from 
Income Tax
From > R$ 1,499.16/month
§R$ 17,990/year
To > R$ 2,246.75/month
§R$ 26,961/year
7.5%
From > R$ 2,246.76/month
§R$ 26,962/year
To > R$ 2,995.70/month
§R$ 35,948/year
15%
From > R$ 2,995.71/month
§R$ 35,949/year
To > R$ 3,743.19/month
§R$ 44,918/year
22.5%
Over > R$ 3,743.20/month
§R$ 44,919/year
———
27.5%
Notes:
§ All yearly figures are approximate
• All non-residents are subject to a flat 27.5% tax on all income earned in Brazil
• An individual is considered a resident if they carry a permanent visa,  have a temporary visa with an employment agreement or when they have been in Brazil for more than 183 days in any twelve month period.
• All amounts noted here are in Brazilian reais (R$) (BRL) — currently at a variable exchange rate of from R$ 1.70 to R$ 1.80 = USD$ 1.00
• Individuals with more than R$ 50,000.00 in a savings account and who receive interest of over R$ 250.00 a month are also subject to income tax on the interest they receive
• Capital gains are taxed at 15%
• Dividend income received from Brazilian companies is tax exempt
• Individuals earning less than R$ 1,499.15 per month are totally exempt from paying any income tax whatsoever but must provide proof of income.

Income tax returns are required to be filed by April 30th and the Receita Federal (the Brazilian equivalent of the IRS in the United States) provides a free, downloadable computer program that allows Brazilians to calculate their income tax, fill in the tax forms, submit their return via the Internet, make a computer backup file and print a hard copy. For more information, visit the the Receita Federal  [in Portuguese].

  Corporate  Income Tax — IRPJ 
Brazil's corporate income tax rate is 34% on net profits. The tax consists of a base tax of 15%, a surtax of 10% (on annual income over R$ 240,000.00), and 9% for social contributions. A foreign company is only considered "resident" if it is incorporated in Brazil.

Corporate Tax Deductions include:
• Losses, however, in the future, only 30% of any current year's taxable income can be written off as a loss.
• Depreciation is deducted using the straight line method.
• Companies involved in technical research can use accelerated depreciation.
• There is no company consolidation for tax purposes.
• New capitalization rules (relating to interest expenses) took effect on January 1, 2010.

Social Security — INSS — Instituto Nacional do Seguro Social
Both employers and employees are subject to social security contributions. Generally, the employer pays 37.3% of the gross salary of the employee—consisting of 28.8% for social security and 8.5% for a severance fund. The employee pays between 7.65% to 11% of their gross salary. The employee's payment has a maximum limit and is based upon a governmental contribution salary table.

Temporary Contribution on the Movement of Values or Transmission of Credits and Rights of a Financial Nature — CPMF —  Contribuição Provisória sobre Movimentação ou Transmissão de Valores e de Créditos e Direitos de Natureza Financeira
With very few exceptions, every financial transaction accomplished at a Brazilian bank was once subject to a tax, a government imposed 0.038% "CPMF" tax.. Originally instituted in 1993 as a "temporary" tax measure to help fund the country's public health care system, it, like many taxes everywhere, continued for years. While in place, the CPMF tax provided up to R$ 22 billion per year to the Brazilian tax coffers, with about  45% going to anti-poverty efforts, 40% to health care and about 15% percent to help cover social security benefits. However, in a December, 2007 vote, the Brazilian senate failed to pass a bill (four votes short of the required  60% majority) that would have extended the CPMF tax until 2011. As a result, the CPMF tax was lifted on December 31, 2007. So, it was "temporary" after all; "temporary" for only about 14 years!

More information about federal taxes is available from the Secretariat of Revenue of Brazil web site in English.


Brazilian State Taxes
Motor Vehicle Tax
— IPVA — Imposto Sobre a Propriedade de Veículos Automotores
All registered motor vehicles are subject to this yearly tax. The exact rate is highly variable depending upon the individual state but is based upon the make, age and current market value of the vehicle. The IPVA tax on most average- to lower-priced newer cars will run well well over R$ 1,000.00. Most states mail the bill in January and allow a discount if paid by a certain date as well as allowing monthly payments over the year.

Taxes on Goods and Services — ICMS — Impostos Sobre Circulação de Mercadorias e Prestação de Serviços
While there is no sales tax per se in Brazil, every manufacturer, distributor, retailer or provider of almost every type of merchandise or service pays the state ICMS and passes the cost along to the consumer. While there are some exemptions (mainly pertaining to goods bound for exportation, raw minerals and interstate transmission of electricity and fuels), the only exemption that really impacts consumers is an exemption on newspapers, magazines and books.

Because this tax is largely a "hidden" tax—in that it is not noted on any receipt nor directly on the price of the goods—most Brazilian consumers have no idea how much  the ICMS is actually costing them. The following chart provides a partial listing of various items and services together with an average percentage of their total cost that is directly attributable to the ICMS:
 

powdered chocolate
37.84%
 gasoline
53.03%
 rice
18.00%
 pencil
36.19%
car (w/ 1.0 liter engine)
39.29%
 bed sheet
37.51%
cookies
38.50%
 books
16.72%
toys
41.98%
pasta/macaroni
21.52%
notebook (school)
36.19%
 table
30.57%
coffee
36.52%
 microwave oven
56.99%
footwear
37.37%
 tomato sauce
36.66%
bed
30.57%
 toilet paper
40.50%
pen
46.69%
 plants/flowers
14.64%
beef
18.67%
 cymbals
44.76%
house (average)
49.02%
soda pop
47.00%
beer (canned)
56.00%
clothes
37.84%
cigarettes
81.98%
powdered soap
42.27%
computer
38.00%
bath soap
42.00%
water service (utility)
29.83%
sofa
34.50%
deodorant
47.25%
telephone service
45.65%
detergent
40.50%
bricks
34.23%
DVD
51.69%
television
46.14%
stove/oven
47.25%
wine
47.20%
fruit
22.98%
cough syrup
36.00%

Brazilian Municipal Taxes
Tax on Services
— ISS — Imposto Sobre Serviços
This is essentially a head tax paid by both self-employed individuals and owners of enterprises that are registered and doing business within a city. The exact rate is variable depending upon the individual municipality or city.

Real Estate Tax — IPTU — Imposto Sobre Propriedade Territorial Urbana
Yearly property tax on houses, condominiums, apartments, etc., based upon the value of the property. The exact rate is variable depending upon the individual municipality or city. Most municipalities mail the bill in January and allow a discount if paid by a certain date as well as allowing monthly payments over the year.
 
 

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