With more than 207 million residents and the ninth-largest economy in the world, Brazil is a draw for global businesses seeking a presence in Latin America and is an attractive locale for mobility workers. In fact, expats ranked Brazil 31st among countries worldwide as a work/living destination.
However, its tax laws can be challenging for workers placed on temporary assignments here. According to HSBC, “Brazil was ranked 125th out of 190 countries in The World Bank’s Ease of Doing Business Survey for 2018, scoring poorly for the amount of red tape involved in paying taxes.”
Here are a few of the tax nuances that talent mobility experts should consider when planning remote assignments in Brazil.
Who’s a Resident?
Notes tax advisors Greenback Expat Tax Services, “In Brazil, you are considered a resident from the moment you arrive if you are the holder of a permanent visa or temporary work permit. If you come to Brazil for other reasons and are in the country for more than 183 days (consecutive or not) in a 12-month period, you will also be considered a resident for tax purposes as of the first day that exceeds the 183-day period.”
Residency Impacts Taxes
Individuals considered Brazilian residents are taxed on their worldwide income. Non-residents pay taxes only on Brazilian income.
A 2016 agreement between the U.S. and Brazil does, however, eliminate double contributions of Social Security taxes. New Brazilian Social Security rates were adopted last year, and they apply to foreign workers in Brazil as well as Brazilians who are working abroad for a Brazilian employer.
What does this mean to your assignees in Brazil? PwC notes:
“Depending on the assignment structure the new rates will affect the remuneration package to be paid, credited, or delivered to the individual, mainly to those under a split payroll arrangement or net-to-gross compensation.”
Taxes Owed Monthly
U.S. workers placed in Brazil may be surprised to learn that tax day here is, well, actually 12 tax days. That’s because under Brazil’s pay-as-you-earn model, income taxes are due on the last day of each month and paid using a tax voucher known as carnê-leão, according to HSBC.
Minimizing Double Taxation
The good news, though, is that thanks to reciprocal double tax treaties between Brazil and 32 countries, many foreign workers in Brazil can avoid paying taxes here and in other countries.
“Brazil is neither a tax haven nor a high-tax destination, but understanding your filing obligations will help minimize your taxes,” advises Greenback.
Want to learn more about conducting business and placing assignees in Brazil? Consider attending our upcoming São Paulo Summit and benefitting from the information that HR, legal, tax and other mobility experts will share through an engaging mix of presentations and small-group discussions. Register today to join the conversation!