u.s. expat tax guide – brazil
Do US expats in Brazil have to pay US taxes or are they exempt?
If you’re a US expat living in Brazil, you might have to pay US taxes, depending on your personal financial situation. Some expats have to pay, while others may qualify for exemptions.
Who qualifies for tax exemptions in the US?
US expats can avoid paying US taxes on foreign income if they qualify for the Foreign Earned Income Exclusion (FEIE). For instance, if you earn up to US$126,500 in 2024 while living in Brazil, you may exclude this income from US taxes by meeting the FEIE conditions and filing Form 2555.
What are the requirements for US expats to qualify for FEIE?
To qualify for the FEIE, you need to meet these conditions:
- Income Must Be Earned Abroad: Your income must be earned outside of the US.
- Foreign Residency Requirement: You must establish residency in a foreign country.
- Physical Presence Test: You need to be physically present outside the US for at least 330 days within a 12-month period. This period doesn’t have to align with the calendar year and can be spread over two different years.
What happens if you earn more than the FEIE limit?
If your income exceeds the FEIE limit of US$126,500, you will need to pay US taxes on the amount above that limit. For example, if you earn US$150,000, you would have to pay US taxes on the additional US$23,500.
What types of taxes do expats in Brazil need to consider?
In Brazil, there are several different types of taxes that can impact expats, such as income taxes, value-added taxes (VAT), and social security contributions.
How does Brazil’s personal income tax affect expats?
- Personal Income Tax (IRPF): Brazil taxes personal income at rates ranging from 7.5% to 27.5%, depending on your income level. If you’re earning income in Brazil, you’ll need to pay Brazilian taxes, but double taxation can be avoided by using the FEIE or the Brazil-US tax treaty. Tax returns are due by April 30 each year, and payments can often be made in up to eight installments.
- Corporate Income Tax (IRPJ): If you own a business in Brazil, the corporate income tax rate is 15%, with an additional 10% surtax for higher income levels. Taxes can be paid either quarterly or annually.
Are expats in Brazil subject to VAT?
- ICMS (Goods and Services Tax): This state-level tax applies to the sale of goods and services, with rates ranging from 7% to 25%, depending on the state and the type of product or service.
- IPI (Manufactured Products Tax): This federal tax is levied on manufactured goods, usually ranging from 0% to 15% based on the product.
- ISS (Service Tax): ISS is a municipal tax applied to services provided within a city, with rates between 2% and 5%. Deadlines vary but are typically monthly.
How do social security contributions work for expats in Brazil?
INSS Contributions: Employees contribute between 7.5% and 14% of their salary to Brazil’s social security system, while employers contribute 20%. Payments are due by the 20th of the following month and include both employee and employer portions.
What other taxes should expats in Brazil be aware of?
- PIS/PASEP and COFINS: These federal taxes are applied to a company’s gross revenues to fund social programs and are paid monthly.
- IPTU (Urban Property Tax): This tax is for property owners in urban areas and is paid annually, with installment options available in some municipalities.
How do Brazilian tax deadlines compare to US deadlines?
Brazilian tax deadlines differ from US tax deadlines. While Brazilian taxes must be filed according to local rules, US expats also need to comply with US filing requirements.
US federal tax returns are due by June 15 for expats, with an extension option available until October 15.
How does the US-Brazil social security agreement benefit expats?
The US-Brazil totalization agreement prevents double taxation on social security by allowing you to contribute to only one system.
If you’re self-employed in Brazil, you generally don’t need to pay US self-employment taxes. This agreement helps protect your benefits by ensuring contributions to just one social security system.
How can US expats catch up on missed tax filings?
If you’ve missed filing your US taxes, you can use the Streamlined Filing Compliance Procedures to catch up without penalties.
This program allows expats to file their last three years of tax returns and the last six years of Foreign Bank Account Reports (FBARs), helping them return to compliance without facing harsh penalties.
What are the most common tax mistakes US expats make?
- Missing Filing Deadlines: Many expats forget they need to file both US and Brazilian tax returns, leading to penalties.
- Not Reporting Foreign Bank Accounts: Expats with foreign bank accounts totaling more than US$10,000 must file an FBAR, a requirement that can often be overlooked.
- Incorrect Use of FEIE or FTC: Some expats make mistakes when using the FEIE or calculating the Foreign Tax Credit (FTC), leading to overpayment or underpayment.
- Assuming Full Exemption from US Taxes: Just because you pay taxes in Brazil doesn’t mean you’re exempt from US taxes. Proper planning is needed to avoid being taxed in both countries on the same income.
More about the Brazil guide
Capital Gains Tax of Selling Property
Capital Gains on Stocks, Shares, Crypto
Foreign Bank Account Report