Brazil: Living There - Tax Issues

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Living There

INDIVIDUAL TAXATION

Residents are taxed on their worldwide income. Married couples are generally taxed jointly but married couples married under the separate property regime can opt for separate taxation. A spouse who is taxed separately may not be considered a dependent for tax purposes.

INCOME TAX

Income from all sources are aggregated and taxed at progressive rates.

Residents can avail of the following deductions and allowances from their gross annual income:

• Substantiated and un-reimbursed medical, dental, and health-related expenses incurred by the taxpayer and his dependants
• Certain contributions and gifts up to 12% of the taxable income
• Education expenses incurred by the taxpayer and his dependants; up to BRL2,373.84 (US$1,329) per person
• Aggregate of the monthly deductions and allowances (see below)

However, all incomes of residents are subject to monthly withholding taxes as advance payment for their final tax liability. The withholding taxes are levied at progressive rates, depending on the monthly taxable income of the resident taxpayers. The taxable income is the monthly gross income less deductions and allowances.

Residents can avail of the following deductions and allowances from their gross monthly income:

• BRL126.36 (US$71) per month per year for each qualifying dependant
• Contributions paid to the national social security system
• Contributions paid to qualified Brazilian private pension funds
• Deductible expenses for calculating income from independent services
• Alimony and child support payments
• The first BRL1,257.12 (US$704) pension paid by the national social security system to taxpayers more than 65 years old

Instead of itemized general allowances, taxpayers who are only earning employment income may choose to take a single allowance for notional expenses equal to 20% of income, but is limited to BRL11,167.20 (US$6,250). Taxpayers availing of this option are not entitled to any other deductions.

Capital Gains

Capital gains derived by individual residents from the transfer of any property or rights taxed at a flat rate of 15%, which is final. Capital gains derived from the sale of property or rights where the sales price does not exceed BRL20,000 (US$8,889) are not taxable.

However gains derived from sales of real estate acquired by the seller before 1970 are tax-exempt for Brazilian residents. Real estate acquired by the seller between 1970 and 1988 benefits from a progressive capital gains tax reduction.

PROPERTY TAX

Real Estate Tax (Imposto sobre a Propriedade Predial e Territorial Urbana or IPTU)

A municipal tax, property taxes are imposed on the market value of urban properties. The tax rates vary from one municipality to the other. Typical rates are around 0.5% to 4% of the property value, as assessed by the municipality, an assessment usually lower than market value.

Rural Property Tax (Imposto sobre a Propriedade Territorial Rural or ITR)

Rural property tax levied on the land located outside the urban zones of the municipality. Unlike the IPTU, this is a federal tax. The tax rates vary from 0.03 to 20% depending on the number of hectares of land and the ratio which the utilized area bears to the total land area. Property owners are liable to pay this tax.

Brazil - more data and information

• Lawyers (attorneys) with property law practices in Brazil

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