U.S. TAX GUIDE IN BRAZIL
Do US expats in Brazil need to pay US tax?
It depends on your tax situation. Some people will need to pay, while others might not.
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Who doesn’t have to pay US tax?
You might not need to pay US tax if you qualify for the Foreign Earned Income Exclusion (FEIE). For example, if you live in Brazil and earn up to US$126,500 in 2024, you could exclude this amount from your taxable income if you meet the FEIE criteria by filing Form 2555.
What are the FEIE Criteria?
To qualify for the FEIE, you need to:
- Have foreign income.
- Establish residency outside the US.
- Be physically present outside the US for 330 days within a 12-month period.
This period doesn’t have to align with the calendar year. For example, it can span from July 20th to July 20th of the following year.
Additionally, the 330 days outside the US do not need to be consecutive. They just need to occur within a 12-month period.
This flexibility allows you to qualify for the FEIE even if your time abroad spans two different calendar years.
What if my income exceeds the FEIE limit?
If your income exceeds the US$126,500 FEIE limit, you will need to pay tax on the amount above the exclusion. For instance, if you earn US$150,000, you will be taxed on the remaining US$30,000.
What types of taxation does Brazil have?
Brazil has several types of taxes, including income tax, value-added tax (VAT), and social security contributions.
Income Tax
- Individual Income Tax (Imposto de Renda de Pessoa Física – IRPF): This is a tax on personal income with rates ranging from 7.5% to 27.5%, depending on your income level. Your global income might be subject to Brazilian taxes, but you can avoid double taxation through the Brazil-US tax treaty and by using the FEIE.
- Deadline: The tax year in Brazil follows the calendar year. Individuals must file their annual income tax returns by April 30 of the following year. Taxes due can typically be paid in up to eight monthly installments.
Corporate Income Tax (Imposto de Renda de Pessoa Jurídica – IRPJ): If you own a business in Brazil, it will be taxed at a flat rate of 15%, with an additional surtax of 10% on income over a certain threshold.
- Deadline: Corporations can choose to pay taxes quarterly or annually. Quarterly payments are due at the end of March, June, September, and December. Annual payments are due by April 30 of the following year.
Value-Added Tax (VAT)
- ICMS (Imposto sobre Circulação de Mercadorias e Serviços): This state tax applies to the circulation of goods and services. However, rates vary by state and type of goods or services, generally ranging from 7% to 25%.
- Deadline: Deadlines vary by state, but typically, businesses must file monthly returns by the 15th of the following month.
- IPI (Imposto sobre Produtos Industrializados): This federal tax is applied to manufactured goods. Rates can vary but typically range from 0% to 15%.
- Deadline: This tax is generally due monthly, with returns filed by the 15th of the following month.
- ISS (Imposto sobre Serviços de Qualquer Natureza): This municipal tax is levied on services provided within city limits. Rates typically range from 2% to 5%.
- Deadline: Municipalities set their deadlines, but it’s commonly due monthly.
Social Security Contributions
- INSS (Instituto Nacional do Seguro Social): If you are employed in Brazil, both you and your employer must contribute to social security. Employees contribute between 7.5% and 14% of their salary, while employers contribute 20%.
- Deadline: Employers must pay social security contributions by the 20th of the following month. The employer withholds the employees’ contributions and pays them together with the employer’s contribution.
Other Taxes
- PIS/PASEP and COFINS: These federal taxes fund social programs and are levied on a company’s gross revenues.
- Deadline: These contributions are typically paid monthly.
- IPTU (Imposto sobre a Propriedade Predial e Territorial Urbana): This municipal tax is levied on urban property ownership.
- Deadline: This property tax is usually due annually, with some municipalities offering the option to pay in installments.
Are the Brazil tax deadlines from my US tax return?
Yes, the tax deadlines in Brazil are separate from those in the US. While Brazilian taxes follow specific deadlines within the country, US expats must also adhere to US tax deadlines.
For example, US expats must file their federal tax return by June 15, with a possible extension to October 15.
Does the US have a totalization agreement with Brazil?
Yes, the US and Brazil have a totalization agreement.
This agreement helps US expats and Brazilian citizens avoid paying social security taxes to both countries on the same earnings.
The totalization agreement is separate from a tax treaty and focuses on Social Security and other taxes, such as self-employment tax.
If you’re self-employed in Brazil, you don’t need to pay US self-employment taxes.
For comparison, if you were self-employed in Argentina, you would have to pay US self-employment tax.
It also determines which country’s social security system an individual should contribute to, ensuring that you don’t lose benefits by contributing to two different systems.
What should I do if I’m behind on filing my US taxes?
If you’re behind on filing your US taxes, you can use the Streamlined Filing Compliance Procedure to catch up without facing penalties.
This program requires you to file your last three years of tax returns and the last six years of Foreign Bank Account Reports (FBARs).
It is designed to help US expats who have missed deadlines get back into compliance with the IRS.
