| Brazil Income Tax Rates Brazil personal income tax rates for 2009 are progressive, up to 27.5%.
Taxable Income (BRL) / Tax Rate %
Up to BRL 17,275 Exempt
BRL 17,276 - 25,800 7.5%
BRL 25,801 - 34,400 15.0%
BRL 34,401 - 42,984 22.5%
Over BRL 42,984 27.5%
In Brazil, two new tax brackets were introduced in 2009 (7.5% and 22.5%). Middle income earners, who were paying income tax between 15% - 27.5% tax band will likely see their tax bracket lowered to between 7.5% - 22.5% respectively, after introduction of the new tax brackets in Brazil.
Individuals in Brazil are subject to a number of taxes, including personal income tax, social security tax, and gift and inheritance tax. Capital gains are subject to a flat 15% tax rate. There is no local or state income tax for individuals in Brazil.
Nonresidents are taxed at a flat rate of 27.5% on earned income, or 15% on other income except dividends paid from a Brazilian entity, which are tax exempt. The source of income is determined by the location of the tax payer.
Brazilian resident individuals are taxable on their worldwide earnings, as well as gains on the disposal of worldwide assets and rights. An individual is resident in Brazil if:
- he/she has a habitual abode in Brazil
- he/she works for a Brazilian government department or agency outside Brazil
- he/she enters Brazil under a permanent visa
- he/she enters Brazil under a temporary visa to work and remains in Brazil for more than 184 days within a 12-month period.
Real Property Tax: The real estate property tax in Brazil is collected by the municipality where property is located and is calculated on a deemed sales price of the property. The tax rate varies by municipality, but may be estimated in the range of 0.3% to 1.0%. Rural property tax is an annual tax assessed on the ownership of rural property at rates ranging from 0.03% to 20%, depending on region and use. The real estate transfer tax is due upon the transfer of title to real property (land, buildings). The tax rate is progressive, from 2% to 6%, calculated, roughly, on the sales price. The buyer is responsible for payment of the real estate transfer tax.
Special Expatriate Tax Regime: There is no tax regime that specifically applies to expatriates in Brazil.
Capital Tax: There is no capital tax in Brazil.
Wealth Tax: There is no wealth tax in Brazil.
Brazil Corporate Tax RatesBrazil corporate income tax for 2009 is 15% plus a 10% surtax on taxable income exceeding BRL 240,000; making the final corporate income tax rate 25%.
Corporate income tax (IRPJ) in Brazil is levied on taxable profits of an entity at a rate of 15%. In addition to the IRPJ, a 10% surtax is imposed on taxable income exceeding BRL 240,000 on an annual basis. Social contribution tax (CSLL) is also levied on entities who are subject to Corporate income tax (IRPJ), to finance the Brazilian federal social security system. The CSLL rate is 15% for financial institutions, and 9% for all others. Thus, taking into account the surtax and social contribution tax on net profits, the corporate income tax in Brazil is a 34% in minimum.
Taxes in Brazil are levied by the federal, state and municipal governments. Brazil has a quite complex system of corporate taxation in which the federal government imposes different kinds of taxes below:
1) Corporate income tax (IRPJ)
2) Social contribution tax on profits (CSLL)
3) Federal value-added tax or excise tax on manufactured goods (IPI)
4) Financial transactions tax (IOF)
5) Excise tax on cross-border royalties and services (CIDE)
6) Tax for social security financing (COFINS)
7) The social integration program (PIS / PASEP)
8) Employer social security contributions (INSS)
9) Rural property tax
Import and export duties are also levied. The tax on financial transactions (CPMF) was abolished on 1 January 2008.
Brazilian states and the Federal District of Brasilia impose value added tax (VAT) on the circulation of goods and services (ICMS), and levies tax on inheritance and gifts and also on motor vehicles.
Municipalities in Brazil and the Federal District charge taxes on services (ISS), urban property and transfers of urban real estate.
Capital Gains Tax: Capital gains are treated the same as ordinary profits. Capital gains realised by nonresidents on investments registered with the central bank are subject to a 15% withholding tax. If the capital gain is derived by a tax haven resident, the rate is then increased to 25%. Foreign investors on the financial market may be subject to different tax rates.
Brazil Withholding Tax Rates
Dividends: Dividends paid to nonresidents are not subject to withholding tax.
Interest: Interest payments to nonresidents are generally subject to a 15% withholding tax in Brazil. The tax rate is increased to 25%, however, if the recipient is resident in a jurisdiction that is deemed to be a low tax jurisdiction (i.e. tax haven). A low tax jurisdiction is generally defined as a country that takes income at a rate lower than 20% and that is included on a government list. It should be noted that a law enacted in June 2008 expanded the concept of tax haven and it is currently unclear whether a new tax haven list will be published.
Royalties: Royalty payments made to nonresidents are subject to a 15% withholding tax, unless reduced by an applicable tax treaty. Payments for technical services that do not involve the transfer of technology are subject to a 25% or 15% withholding tax. Thus, even though technical services are included within the scope of royalties, Brazil tax authorities may charge a 25% tax, if not specifically addressed in a tax treaty.
Profit Participation Contribution (PIS) and Social Security Financing Contribution (COFINS)
PIS and COFINS are federal taxes in Brazil, imposed monthly on gross revenue. PIS is a mandatory employer contribution to an employee savings initiative and COFINS is a contribution to finance the Brazil social security system.
Tax rates of PIS and COFINS under the 'Lucro Real' system are 1.65% and 7.6% respectively. Those two taxes operate similar to a VAT mechanism for companies paying corporate income tax based on actual income. Under this system, a company is entitled to an input tax credit on the purchase of raw materials, intermediary products, and services used in the manufacturing process or for the provision of services. PIS and CONFINS input tax credits may be offset against the same tax imposed on gross revenue.
Service Tax (ISS)
Tax on services (ISS) is a municipal tax in Brazil, and is imposed on the supply of services, other than those subject to ICMS. The taxable basis of Service Tax (ISS) is the price of the service rendered. Service Tax (ISS) rates vary between 2% and 5%, depending on the city and the type of service rendered. ISS is not a creditable tax. However, it is charged monthly to the customer as part of the contract sale price.
Tax on Financial Operations (IOF): The federal tax on financial operations applies to various types of transactions, including loans, insurance policies and short-term money market applications. The tax rate is 0.0082% per day for credit transactions within Brazil, and an additional surtax of 0.0038% on all credit transactions.
Real Estate Property Tax: The real estate property tax is an annual tax in Brazil, assessed on the ownership of real property. The tax, collected by the municipality where property is located is calculated on a deemed sales price of the property. The tax rate varies from city to city, but may be estimated in the range of 0.3% to 1.0%.
Real Estate Transfer Tax: The real estate transfer tax in Brazil is due upon the transfer of title to real property (land, buildings). The tax rate is progressive, from 2% to 6%, calculated, roughly, on the sales price. The buyer is responsible for payment of the real estate transfer tax.
Rural Property Tax: Rural property tax is an annual tax assessed on the ownership of rural property at rates ranging from 0.03% to 20%, depending on region and use.
Vehicle Property Tax: Vehicle property tax is assessed annualy, on the ownership of vehicles such as motorcycles, boats and airplanes. The tax rate varies from state to state, but may be estimated in the range of 1% to 6%.
Social Insurance (INSS): Employers in Brazil are required to make a contribution of 8% of wages to each worker's deferred salary account to the length of Srrvice Guarantee Fund (FGTS). Employers in Brazil must also contribute 20% of an employee's wages to the National Institute for Social security (INSS), Brazil's public pension system, and a maximum of 8.8% on other social security taxes. Employees contribute 8% - 11%, depending on their salary.
Brazil Sales Tax / Value Added Tax RatesThere are 2 different VAT-type taxes in Brazil:
1) Federal VAT (IPI), and
2) State VAT (ICMS)
Federal VAT (IPI)
IPI is a federal level, single stage VAT-type tax levied on the manufacture of goods in Brazil and on the import of goods. Exports are exempt. For IPI purposes, the taxpayer is the manufacturer or the importer.
The national VAT (IPI) rates depend on the type of the product, at an average rate of 20%.
State VAT (ICMS)
ICMS is a value added tax levied by the Brazilian states on the circulation of goods and the provision of interstate and inter-municipal transportation and communications services. The tax applies even when a transaction and the provision of services commence in another country.
The state VAT (ICMS) is charged at rates ranging from 7% - 25%.
Intrastate transactions are taxed at 18%, interstate transactions are taxed at 7% or 12%, and most imports are taxed at between 18% and 25%. The lower rates normally are charged on transfers to less developed states. Some states offer rate reductions or later payment dates as a fiscal incentive for the installation of factories. Communication services are taxed at between 13% and 25%. ICMS is a non-cumulative tax.
In addition to above taxes in Brazil, Profit Participation Contribution (PIS) and Social Security Financing Contribution (COFINS) are also taxes which operate similar to a VAT mechanism for companies paying corporate income tax based on actual income. Also Service Tax (ISS) is imposed on the supply of services.
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