Expat Tax Guide for Americans Living in Brazil

Living as an Expat in Brazil

Living as an expat in Brazil can be an exciting and enriching experience. Brazil is a country with diverse cultures, languages, and landscapes, and expats can enjoy a rich and vibrant lifestyle here. 

The warm and welcoming locals, along with the delicious food, lively music, and stunning beaches, are just a few of the many reasons why people choose to live in Brazil. However, living in Brazil can also come with its own set of challenges, such as language barriers, bureaucratic hurdles, and safety concerns. 

Expats can overcome these challenges by learning the language, staying informed about local laws and customs, and building a supportive network of friends and colleagues. Brazil’s economy is growing rapidly, and there are many opportunities for expats to find work or start their own businesses. 

But what are Brazil’s taxes like for Americans living abroad? In this guide, we’ll go over what you need to know about expat taxes in Brazil.

Brazil at a Glance

What Are Expat Taxes Like for Americans Living in Brazil?

For American expats living in Brazil, understanding and navigating the tax system can be challenging. The United States is one of the few countries that taxes its citizens on their worldwide income, regardless of where they reside. 

In addition to filing taxes in Brazil, American expats in Brazil are also required to file US taxes and report any foreign assets or income. Failure to do so can result in hefty fines and penalties. 

To ensure compliance with both US and Brazilian tax laws, American expats in Brazil should seek the assistance of qualified tax professionals like Greenback Expat Tax Services.

Who Has to File Taxes in Brazil?

Brazil’s tax filing requirements vary depending on whether you qualify as a resident or non-resident for tax purposes.

• If you are considered a tax resident, you must file a tax return reporting your worldwide income in Brazil.
• If you are considered a non-resident, you are only taxed on income that comes from a Brazilian source—and you won’t have to file an annual return until you become a resident.

Who Qualifies as a Tax Resident in Brazil?

There are a few primary ways you can be considered a resident of Brazil.

• If you hold a permanent visa for entry to Brazil, you are considered a resident from the day you arrive in the country.
• If you hold a temporary work visa under an employment contract with a Brazilian entity, you are considered a resident from the day you arrive in the country.
• If you are in the country for more than 183 days within any 12-month period, you are considered a resident starting on the 184th day (these days do not have to be consecutive)

What Types of Taxation Does Brazil Have?

Income Tax

Brazilian residents are taxed on their worldwide income at progressive rates that range from 7.5% to 27.5%.

Earnings in BRL – Tax Rate Applicable to Income Level

Non-residents are taxed on only their Brazil-source income at a flat rate of 25%. If you are a non-resident, you do not have to file an annual tax return until you become a resident.

A new law alters the tax treatment for profits from entities controlled abroad, capital gains on sales of foreign assets, and exchange rate gains. It also introduces new rules for valuing foreign assets and rights, affecting trusts and closed condominium funds. The law’s implications are substantial for international assignees and employers, necessitating adjustments in tax planning and compliance strategies.

Capital Gains Tax

Brazil imposes a tax on capital gains made from:

• Sales of real estate
• Sales of vehicles
• Sales of art and collectibles
• Sales of stocks in foreign markets
• Interest income from offshore investments

The rate for this tax is generally 15%.

Corporate Tax

Brazil’s corporate tax rate is fixed at 15% of annual taxable income. This may be calculated using either the Actual Profit Method or the Presumed Profit Method.

Property Tax

There is no national property tax in Brazil, but Brazilian municipalities generally levy a local property tax. The rates for this tax vary by region and are generally calculated based on the fair market value of the property.

Transfer Tax

As with Brazil’s property tax, the transfer tax is imposed only at the municipal level. This tax applies to the transfer of immovable property. Rates vary by region.

Estate and Gift Tax

Brazil has no national estate, inheritance, or gift taxes. Some municipalities do impose a form of this taxation. Rates vary, with a maximum tax rate of 8%.

Import Tax

Brazil levies a tax on certain goods imported into the country. Rates vary based on various factors but tend to range from 10%–20%.

When Are Taxes Due in Brazil?

Just like in the US, the Brazilian tax year is the same as the calendar year: January 1 to December 31.

For most forms of income—such as a traditional salary—your taxes will be withheld at the source and paid on a monthly basis. If you qualify as a resident, you must also file an annual tax return each year to confirm your income. You may also need to report any types of income not covered by your monthly tax payments, such as investment income. (This income would not have been withheld at the source.)

In most years, the due date for your annual tax return is the last business day of April. However, as of 2023, the Brazilian government has extended that deadline to May 31. (There is no extension available beyond this.)

Failure to file a tax return when required or pay all taxes owed may result in severe penalties.

Does the US Have a Tax Treaty with Brazil?

No. There is currently no US-Brazil tax treaty. This leaves Americans living in Brazil at risk of double taxation on their income. Fortunately, the IRS tax credits listed above can help reduce the risk of double taxation for most US expats.

Does the US Have a Totalization Agreement with Brazil?

Yes, the United States and Brazil have a Totalization Agreement. The purpose of this agreement is to help ensure that workers who are employed in both countries are not subject to double taxation on their Social Security contributions. 

Under the agreement, workers who are employed in one country but are residents of another are only required to pay Social Security taxes to one country at a time. This can help eliminate the burden of paying taxes to both countries and can provide some relief to American expats living in Brazil. 

In addition, the agreement can also help ensure that workers are eligible for Social Security benefits in both countries. This can be particularly important for expats who may not have the opportunity to accumulate enough credits to qualify for Social Security benefits in the United States. 

What Tax Forms Do Americans Living in Brazil Have to File?

Most expats living in Brazil will have to file an annual income tax return with the Brazilian government. In addition to this, you will have to file at least one US tax form—and probably a couple more. Here are the most common tax forms US expats have to file.

IRS Form 1040: Individual Income Tax Return

Form 1040 is the standard US individual income tax return. All US citizens are required to file this form regardless of where they live.

Typically, taxpayers must file Form 1040 by April 15th. However, the IRS automatically extends expats’ due date to June 15th. Taxpayers can also request a further extension to October 16th.

IRS Form 8938: Statement of Specified Foreign Financial Assets (FATCA)

If you own non-US financial assets valued above certain thresholds, you must file a FATCA report. The specific threshold for your finances will depend on your filing status and whether you qualify as a bona fide resident of Brazil.

If you do have to file a FATCA report, fill it out, attach it to your Form 1040, and file it at the same time.

FinCEN Form 114: Report of Foreign Bank and Financial Accounts (FBAR)

If you have at least $10,000 deposited in one or more non-US bank accounts, you’ll need to report it by filing FinCEN Form 114, also known as the FBAR.

Unlike the previous forms, you can’t file the FBAR by mail. You must file it electronically using the FinCEN BSA E-Filing System.

What US Tax Deductions Are Available for Expats Living in Brazil?

The IRS provides several other potential tax credits and deductions for Americans overseas. Using these tax benefits, many expats are able to erase their US tax debt entirely. Let’s look over the three most common.

1. Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion is a tax credit that lets expats exclude a certain amount of foreign-earned income from US taxation. The exact amount you can exclude changes from year to year, but is currently set at $120,000 for the 2023 tax year.

If you qualify for the Foreign Earned Income Exclusion, you can claim it by filing IRS Form 2555.

2. Foreign Tax Credit

Using the Foreign Tax Credit, expats can deduct the income taxes they paid to foreign governments from their US tax bill, dollar for dollar. This helps reduce the possibility of double taxation.

If you qualify for the Foreign Tax Credit, you can claim it by filing IRS Form 1116.

3. Foreign Housing Exclusion

The Foreign Housing Exclusion lets expats deduct housing-related expenses from their US tax bill.

If you qualify for the Foreign Housing Exclusion, you’ll have to claim it using Form 2555, as this exclusion is only available if you also claim the Foreign Earned Income Exclusion.

What If I’m Behind on Filing My US Taxes?

Every US citizen is required to file an annual US tax return. This applies regardless of where you live. However, if you didn’t know that, you’re far from alone. Many Americans living overseas are unaware of this tax obligation.

Fortunately, the IRS provides an amnesty program to help expats come into compliance without facing any penalties. It’s known as the Streamlined Filing Compliance Procedures.

To use this program, all you have to do is:

• Self-certify that your failure to file was an accident, not a willful refusal
• File the last three delinquent income tax returns and pay any delinquent taxes you owed during that time (with interest)
• File Foreign Bank Account Reports (FBARs) for the last six years

This will bring you into compliance with IRS regulations.

Navigating Tax Compliance for US Expats in Brazil

We trust that our guide has improved your understanding of how Brazil’s tax policies can impact US expats. If you have any further questions or concerns, our team of tax experts is always available to help.

Have questions about the process or next steps? Contact us, and one of our Customer Champions will happily address all your concerns. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.