If you are considering company formation in Brazil, or are already doing business in Latin America’s largest economy, you will need to deal with tax filing in the country. There are two systems for tax filing in Brazil that are most relevant to foreign investors, as well as three main governmental levels at which taxes are levied.
That means, depending on the system used and location of your business, tax filing in Brazil can vary significantly, so you will likely want to seek out reliable local accountants to help you with it.
Known as ‘the Giant of South America’, Brazil is the 8th largest economy in the world, which registered a gross domestic product (GDP) of $1.84 trillion in 2019 (all figures in USD unless otherwise stated). That same year, it also posted a gross national income (GNI) of $9,130 per capita — placing Brazil as an upper-middle income nation by standards set by the World Bank.
The country is a major producer of agricultural and primary goods, and a major hub for trade. It is a founding member of the Southern Common Market (Mercosur,) a 30-year-old economic integration initiative that also includes neighbours Argentina, Paraguay, and Uruguay, with Bolivia awaiting formal membership.
With a population of 211 million, and a fast-growing middle class, Brazil also has a significant and growing professional services industry.
All of this adds up to make it a popular destination for international investors, including receiving the fourth-highest inflows of foreign direct investment (FDI) world wide. In 2019 alone, FDI inflows were registered at $73.5 billion.
Some of Brazil’s highest volume export products include coffee, soybeans, and timber, with key destinations for goods including Argentina, Chile, China, the Netherlands, and the United States.
If you are considering market entry into this massive market, read on to understand more about tax filing in Brazil. Or reach out to us now to discuss how we can support your business.
The taxation system in Brazil
When it comes to tax filing in Brazil, the country’s complex tax system can make it challenging for newcomers. Taxes are imposed at the federal, state, and municipal level, which will vary depending on the type of activity you are involved in, the size of the company, and your income and profit levels.
There are three main taxation regimes in Brazil, however the so-called ‘Simple National’ (Simples Nacional) regime does not apply to entities owned by foreign shareholders, or which have their headquarters outside of Brazil, and therefore it is not relevant to foreign investors. The other two regimes are the ‘Estimated Profit’ (Lucro Presumido) regime and the ‘Net Profit’ (Lucro Real) regime.
The Estimated Profit regime: involves tax being calculated based on your Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) as levied by Brazil’s National Revenue Service (Receita Federal — RF). If your annual profits fall under 78 million Brazilian reals (approximately $14.8 million at time of publication), this tax regime will apply to your company.
The Net Profit regime: involves tax being calculated based on your overall net profits, and it is applied to any entity whose profits exceed the above mentioned figure. This tax regime is generally applied to multinational companies and financial institutions.
General information about tax filing in Brazil
Brazil’s corporate tax rate is 34%, and the tax year runs with the calendar year, beginning on January 1 and ending on December 31. Taxes must be paid in Brazilian reals, the country’s official currency.
For tax filing in Brazil, resident companies’ taxes are calculated based on worldwide income, while non-resident companies only pay taxes on income generated in Brazil.
The highest rate of personal income tax is 27.5%, and tax returns should be filed to the RF no later than April 30 following the tax year being declared.
Tax filing in Brazil: types of taxes
As previously stated, taxes are applied at the federal, state, and municipal level. Below, some of the main taxes levied at each level are listed.
Tax filing in Brazil involves the following federal taxes:
II: Import tax.
IOF: Tax on financial operations. This tax applies to loans, shares, financing, and other financial operations.
IPI: Tax on industrialized products, which is collected from industries.
IRPF: Individual income tax.
IRPJ: Corporate income tax, which is calculated according to companies’ profits.
ITR: Tax on rural property.
Cide: A contribution for intervention in the economic area. You’re subject to paying this tax when you trade in oil, natural gas, and its derived products, as well as on fuel alcohol, such as bioethanol.
Cofins: A contribution collected from companies which finances as part of Brazil’s Social Security System (Sistema Único de Saúde — SUS).
CPMF: A provisional contribution on financial transactions, which is applied to every inflow and outflow of money from bank accounts.
CSLL: Social contribution on net income.
FGTS: Guarantee fund for workers, which is a percentage of each formally contracted worker’s salary.
INSS: National Institute of Social Security contribution, made up a percentage of each employee’s salary, with companies paying approximately 28% of that figure and workers paying approximately 8%.
PIS/Pasep: Programs of social integration, collected from companies.
Tax filing in Brazil involves the following state taxes:
ICMS: Tax on the circulation of merchandise, which applies to interstate and intercity transportation and telecommunications.
IPVA: Tax on ownership of motor vehicles.
Tax filing in Brazil involves the following municipal taxes:
IPTU: Tax on urban land and property.
ISS: A tax collected from companies related to services.
ITBI: Tax on the transmission of inter vivos goods, which is paid when a property changes ownership.
Tax filing in Brazil: Double taxation agreements
When tax filing in Brazil, your accountant will be able to help you take advantage of any applicable double taxation agreements, so that you only pay tax on a particular income in one jurisdiction.
Brazil has a wide range of such agreements in place, including with Argentina, Belgium, Canada, Chile, China, Denmark, Ecuador, Finland, Japan, Luxembourg, Mexico, Netherlands, Norway, Peru, Portugal, Spain, and Sweden, among others.
Biz Latin Hub can assist you with tax filing in Brazil
At Biz Latin Hub, our multilingual team of corporate support experts is available to assist you with tax filing in Brazil. With our comprehensive portfolio of back-office services, including accounting & taxation, company formation, legal services, recruitment, and visa processing, we can be your single point of contact for entering and doing business in the Brazil, or any of the other 17 markets in Latin America and the Caribbean where we have local teams in place.
Contact us today to discuss how we can help you reach your commercial goals
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