Brazilian Tax and Taxation in Brazil

Information on Brazilian taxes: general taxation on income, how it’s calculated, when to pay, what exemptions are available and more

In Brazil, the general principles of taxation are defined by the Federal Constitution. Taxes are levied at the Union, Federal District, state and municipality levels.

The Cadastro de Pessoa Física – CPFis an Individual Taxpayer Number and is required for many everyday transactions in Brazil.

Income Tax (Imposto de Renda das Pessoas Físicas – IRPF)

Foreigners resident in Brazil (and all Brazilians as well) are subject to personal income tax known as imposto de renda das pessoas físicas – IRPF. This tax is a Union tax and payment is collected from the Federal Government at the source. In April, taxpayers must also declare their annual income.

The Ministry of Finance(Receita Federal do Brasil – RFB) is responsible for the collection of the IRPF.

In accordance with Brazilian legislation, a foreigner working in Brazil is considered resident if:

  • On the date of arrival in Brazil the foreigner has a permanent visa
  • On the date of arrival in Brazil the foreigner has a temporary contract of employment with a Brazilian company

Income tax is payable by any resident individual (pessoa física) who receives more than R$15,764.28 (as of January 2009) in the tax year from a salaried job, non-salaried job, pensions, rental activity or rural activity.

The tax is collected on all income, including wages, bonds, commissions, prizes and other forms of remuneration. Housing expenditures and student fees amongst others are classified as an indirect wage and are taxable.

How to submit an income tax declaration and pay income tax

Personal income tax declarations can be made to the Ministry of Finance(Receita Federal) in a number of ways:

  • Online: A downloadable progamme (Programa Gerador da declaração) is made available by the Ministry of Finance(Receita Federal) that allows taxpayers to calculate their taxes, fill in the forms and file their returns.
  • Using a diskette (Disquete): Download the Programa Gerador da declaração and save it onto a diskette, take the saved programme to an agency of the Banco do Brasil S.A or the Caixa Econômica Federal
  • By filling in a Declaração de Ajuste Anual form (Formulario) at the post office (Correios). A small fee is payable by the taxpayer when declaring tax in this way

Note: Declarations and payment made online must be completed before 20:00 (Brasília time) annually on 30 April. Payments after this time are considered late.

  • For further information on paying IRPF and the fines for late payment: Click here(in Portuguese)

Brazilian tax legislation allows deductions on the IRPF for the following paid expenses:

  • Social security contributions paid to theNational Institute of Social Security
  • Spousal maintenance payments
  • Dependents – deductions are available for dependents (including spouse, children, parents and others)
  • Education expenses of both the tax filer and their dependents (limited to R$1,700 each year, as of January 2009)
  • Some health expenses, including doctor, dentist and laboratory fees, psychologists, hospitals and x-ray examinations

These expenditures should be recorded and deducted from declared taxable income when the annual adjustment is made.

The monthly anticipated payments of the IRPF are calculated and collected in accordance with the gradual table below (valid for the year 2009):

 

Monthly Salary Percentage Deduction
R$1,434.59 Exempt 0
R$1,434.59 to 2,150.00 7.5% R$107.59
R$2,150.01 to 2,866.70 15% R$268.84
R$2,866.71 to 3,582.00 22.5% R$483.84
above R$3,582.00 27.5% R$662.94

 

  • For an IRPF calculator from the Ministry of Finance: Click here 

Non-residents of Brazil are taxed IRPF (at source) of 15 percent for any type of work carried out in Brazil. This applies to foreigners on temporary work visas

Brazil has double taxation treaties with some countries to ensure that those with income tax liability in another country don’t also pay in Brazil or vice versa on the same income. Income tax paid in another country on the same source of income can be deducted from the IRPF due in Brazil when the annual adjustment is made. There are set limits (dependent on the amount of money earned abroad) to the the deduction that can be claimed.

  • For further information from the Ministry of Finance on double taxation treaties:Click here
  • For further information and examples of set limits:Click here(PDF in Portuguese, see page 63)
Tax on Services (Imposto Sobre Serviços – ISS)

A tax on services (imposto sobre serviço) mustbe paid by the self-employed. This tax is paid to the local authority (Prefeitura) of residence, or in some cases (in the field of construction) to the local authority where the construction work took place.

ISS is between two percent and five percent of the quoted and agreed price of a provided service. For example a taxi driver in São Paulo should pay two percent of the fare and a journalist or an information technology consultant would pay five percent of the service charge.

Some liberal professionals, such as psychologists, lawyers, doctors and dentists have an annual fixed ISS payment.

To pay ISS in São Paulo a person must either pay at the Prefeitura responsible for collecting the tax (Secretaria Municipal de Finanças da Prefeitura de São Paulo) or online.

To pay ISS in person:

  • Secretaria Municipal de Finanças da Prefeitura de São Paulo, Praça de Atendimento (service area) At: Vale do Anhangabaú 206 (next to the Galeria Prestes Maia) Tel: 156 (free ISS information number; 24 hours a day) e-mail Open: Monday to Friday 08:00-18:00

To pay ISS online:

  • To pay online Click hereand enter the CMM number (Cadastro de Contribuintes Mobiliários)
  • For further information on the ISS:Click here(in Portuguese)
Inheritance Tax (Imposto Transmissão Causa Mortis e Doação – ITCMD)

The inheritance tax (ITCMD) is a state tax on transfers of goods on death-related inventories or donations. ITCMD is usually payable on real estate or lump sums of cash.

The Federal State of Brazil has fixed the amount of ITCMD at eight percent. However, each state may set a different rate; for example in the State of São Paulo the inheritance tax payable is four percent.

  • For links to state secretariats throughout Brazil: Click here
Tax for Vehicle Owners (Imposto sobre Propriedade de Veículos Automotores – IPVA)

A mandatory motor-vehicle ownership tax (imposto sobre propriedade de veiculos automotores – IPVA) is payable for all motor vehicles in Brazil. This is paid annually, the month in which it is to be paid corresponds with the final digit of the vehicle’s registration number. It is paid in arrears and not for the following year. The process is referred to as licenciamento, and to obtain the road tax statement the driver must pay any outstanding fines for parking or speeding.

  • To find out when to expect to pay the tax: Click here(in Portuguese)
  • To find out how much is due:Click here(in Portuguese)

This tax is calculated on the vehicle’s value and is levied by the state, though the municipality in which the car is registered also receives money. The money is used at state and municipal level for general purposes.

When the payment is due, the car owner will receive a letter from the local Department of Transport office (DETRAN) indicating the amount due and a due date. This letter will need to be taken to the bank which is financing the car if the owner has a loan outstanding, or in most cases, to the bank with which the owner has an account. Some banks offer an option to pay the IPVA in three monthly payments, and in some states in Brazil it is possible to pay this in monthly instalments.

The vehicle owner will need to present their vehicle registrations document (Certificado de Registro e Licenciamento do Veículo/CRLV) when making the IPVA payment. Once payment has been made, the statement sent by DETRAN will be stamped and must be kept with the other vehicle documents in the car when driving to indicate that the IPVA has been paid. Failure to pay the IPVA incurs a fine. An updated CRLV is sent through the post by the local DETRAN.

  • For information on banks where the tax can be paid: Click hereand select “bancos” from the left side menu

The Brazilian road tax system includes an automatic minimum third-party insurance system known as DPVAT (personal injury caused by road vehicles/danos pessoais causados por veîculos automotores de vias terrestres). This is sometimes referred to as Seguro Obrigatrio or compulsory insurance. This ensures all vehicles have minimum third-party cover and victims of road accidents will receive damages or compensation for injuries.

  • For further information on the DPVAT insurance system: Click here 
Urban Building and Land Tax (Imposto sobre Propriedade Predial e Territorial Urbana – IPTU)

The urban building and land tax (Imposto sobre Propriedade Predial e Territorial Urbana) is a property tax payable every month to the local authorities where the property is located. The IPTU of a property is determined by the market value of the property, its location and the type of property (building, house, apartment or land).

IPTU is an annual tax and can be paid all at once or in 10 monthly payments without interest. Most Brazilians and foreigners choose to pay IPTU through direct debit from their bank accounts but IPTU can also be paid by telephone, at any ATM bank machine and in person at many Brazilian banks.

A bill for the IPTU is sent annually in January. It arrives in a booklet form containing payment slips with information on how the bill has been calculated. These slips can be used when paying the bill at an ATM bank machine or to set up the initial direct debit arrangement with the bank.

Transfer Tax on Goods (Imposto sobre Transmissão “Inter Vivos” de Bens e Imóveis e de Direitos Reais sobre Imóveis – ITBI)

The inter vivos transfer tax is a municipal tax on transfers of real estate and rights to real estate.

The transfer between people of real estate or land is subject to the Imposto de Transmissão de Bens Inter Vivos. The amount of this tax varies from city to city in Brazil and is calculated based on the value of the goods in question. For example, the tax in the City of São Paulo is calculated on a graduated scale and can vary from between 0.5 percent and 2 percent.

  • For information from the Prefeitura of São Paulo on the current ITBI rates: Click here(in Portuguese)

A sale of an urban property in São Paulo must be declared online to the Prefeitura.

  • To declare the sale of a property in São Paulo: Click here
Social Security (Seguridade Social)

In Brazil all self-employed individuals as well as employees of companies must pay social security contributions to the National Institute of Social Security(Instituto Nacional do Seguro Social – INSS) of the Ministry of Social Welfare (Ministério da Previdência Social). This contribution guarantees that the contributor or their family will receive money in the event of illness, injury, accident, pregnancy or death of the payee. An employee will pay between 8 and 11 percent; a self-employed individual will pay 20 percent.

  • Self-employed workers can register to pay into the Social Welfare fund online: Click here(in Portuguese)

The Ministry of Social Welfare has a helpline for information. Calls are free unless calling from a mobile phone.

  • Ministry of Social Welfare    Tel: 135 (Monday to Saturday 07:00-22:00 Brasília time; summer hours: 08:00-23:00). Website

Employees have their contribution of between 8 percent and 11 percent of their wage retained by their employer and paid to the Social Welfare Fund. This contribution is limited to a maximum of R$334.28 per month. If desired, employees can make additional contributions to a private pension fund. The table below demonstrates the progressive retention rates for 2008.

 

Monthly Salary Percentage
Up to R$911.70 8 percent
R$911.71 to R$1,519.50 9 percent
More than R$3,038.99 11 percent