If you are thinking about 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. The two main systems for tax filing in Brazil are most relevant for foreign investors.
This means that depending on the system used, and the location of your business, this could mean: Tax filingIn BrazilThere are many variables, so it is worth looking into. reliable local accountantsWe are here to help.
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 exporter of primary goods and agricultural products, and a major trade hub. It is a founding member. the Southern Common Market (Mercosur,) a 30-year-old economic integration initiativeIt also includes Uruguay, Paraguay, Argentina, and Paraguay. Bolivia is still waiting for formal membership.
Brazil boasts a population exceeding 211 million and a growing middle class. Brazil also has a significant professional services industry.
It is a popular destination for international investors. It also receives the fourth-highest foreign direct investment (FDI), worldwide. 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 interested in entering this huge market, learn more about Brazilian tax filings. Or reach out to us nowLet’s talk about how we can help your business.
Brazil’s tax system
When it comes to tax filing in Brazil, the country’s complex tax system can make it challenging for newcomers. The federal, state and municipal levels impose taxes. These will vary depending on your type of activity, the size and income of your company and the level of profit.
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). This tax regime will apply to you if your annual profits are less than 78 million Brazilian reals (approximately $14.8million at the time of publication).
The Net Profit regime This tax is calculated based upon your total net profits and applied to all entities whose profits exceed this figure. This tax regime generally applies 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. Companies must file taxes in Brazil by May 31 after the declaration of the tax year.
The highest rate of tax for personal income is set at 27.5%. This applies to anyone who earns more that 4,665 Brazilian reals a month (approximately $987.50 at the time of publication) or approximately 56,000 Brazilian reals a year (approximately $10,000).
Tax returns must be submitted to the RF by April 30, the day after the declaration of the tax year.
Types of taxes that Brazil tax filings
Taxes are applied at the federal and state levels, as well as at the municipal level. Below are the main taxes levied at each of these levels.
Brazil has the following federal taxes that can be used to file tax returns:
IOFTax on financial operations. This tax applies to loans and shares, financing, as well as other financial operations.
IPI: Industries collect the tax on industrialized goods.
IRPFIndividual income tax
IRPJ Corporate income tax, which is calculated according to companies’ profits.
ITR:Taxes on rural property
Cide:Contribution to economic intervention. 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).
CSLLSocial 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/PasepCompanies can collect information about programs of social integration.
Brazil’s tax filings include the following state taxes
ICMSTax on the distribution of merchandise. This tax applies to interstate and intracity transportation, and telecommunications.
IPVA:Tax on motor vehicle ownership
Brazil has the following municipal taxes that can be used to file tax returns:
IPTU:Taxes on urban land and properties
ISS:Taxes collected from companies in relation to services.
ITBI: Taxes on inter vivos goods transmission are charged when property ownership changes.
Tax filing in Brazil: Double taxation agreements
Your accountant can help you to take advantage of double taxation agreements in Brazil when filing your tax returns. This will allow you to only pay tax on one income.
Brazil has a variety of agreements, including those with Argentina, Chile and China, Denmark, Ecuador. Japan. Luxembourg. Mexico. Peru. Spain.
Biz Latin Hub will assist you in Brazil with tax filing
Biz Latin Hub’s multilingual team of corporate support specialists is available to help you with Brazil tax filings. We offer a wide range of back-office services including accounting & taxation? company formationWe can help you with visa processing, legal services, recruitment, and legal representation.
Contact us today Contact us to discuss how we could help you achieve your commercial goals
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