Income Tax Return for foreigners

Foreign nationals residing in Brazil must submit the Annual Income Tax Return to the Federal Revenue Service. 

Any person who enters Brazil with a permanent visa is considered to be resident in the country as of the date of arrival. There are also situations, even when in possession of a temporary visa, where a foreign national is considered resident in the country. This is the case when a foreigner: 

• Comes to work in Brazil under an employment agreement.

• Resides in Brazil for 184 days (six months), whether consecutive or not, within a period of up to twelve months.

• Obtains a permanent or employment visa before completing 184 days of residence in the national territory, whether consecutive or not, within a period of 12 months.

If included in the categories above, the foreigner must be aware of the deadlines and rules set by the Federal Revenue Service.

Taxation

All income received by a foreign national in Brazil or abroad is subject to taxation. This applies to the sale of assets or rights, liquidation or redemption of investments, earnings from rural activities and other income received from other individuals or from abroad that is not withheld and is subject to a monthly tax payment known as 'carnê-leão' (mandatory tax collection, to which the individual resident in Brazil is subject, on receipt of taxable income from another individual or from abroad, without an employment agreement, when not taxed at the source in Brazil).

All income received, as well as payments made, must also be detailed in the Annual Income Tax Return program, available for download(content in Portuguese) on the Federal Revenue Service website. The deductions applicable to all other taxpayers, such as payment of alimony, private pension contributions, medical and education expenses, and dependents' expenses are also applicable to the foreign resident.

All resident taxpayers must submit the Annual Income Tax Return, relating to 2012, by April 30, 2013. The document can be sent over the Internet or delivered on a floppy disk or flash drive to branches of Banco do Brasil or Caixa Economica Federal.

An individual who falls under at least one of the following conditions is required to submit the Income Tax Return:

• Received a total taxable income greater than R$ 24,556.65.

• Received exempt income, whether non-taxable or taxed exclusively at the source, of more than R$ 40,000, such as interest from savings, earnings from financial investments, 13th salary, and lottery winnings, among others.

• Obtained, in any month, capital gain on the sale of assets or rights, subject to income tax, or performed operations in stock, commodity, and futures exchanges and similar.

• With regard to rural activities:

a) Obtained gross income in excess of R$ 122,783.25 (one hundred and twenty-two thousand, seven hundred and eighty-three Brazilian reals and twenty-five cents).

b) Intends to offset losses, from previous calendar years or the current calendar year of 2012, in the 2012 calendar year or later.

• Had, on December 31, possession or ownership of assets or rights, including bare land, of total value greater than R$ 300,000.00 (three hundred thousand Brazilian reals).

• Obtained residency status in Brazil in any month and maintained this status on December 31.

• Opted for exemption from the income tax payable on capital gain realized on the sale of residential properties, the proceeds of which are intended for the purchase of residential properties located in the country, within 180 (one hundred and eighty) days of the conclusion of the contract of sale, pursuant to Article 39 of Law No. 11.196, of November 21, 2005.

Agreements

Brazil has established agreements with 32 countries in order to avoid double taxation on income earned abroad. Accordingly, the income tax already collected in the country of origin may be offset at the time of determining the balance of tax payable in Brazil, always observing the offset limit (the difference in the tax calculated with the inclusion of income from abroad and the tax calculated without these values). This offset applies both to the Annual Income Tax Return and the determination of the monthly amount to be collected via 'carnê-leão' (see above).

The taxpayer must provide a sworn translation into Portuguese of proof of income and tax paid for the due offset.

Brazil maintains agreements with the following countries: South Africa, Germany, Argentina, Austria, Belgium, Canada, Chile, China, Korea, Denmark, Ecuador, Slovakia, Spain, the United States, Philippines, Finland, France, Hungary, India, Israel, Italy, Japan, Luxembourg, Mexico, Norway, the Netherlands, Peru, Portugal, the United Kingdom, Czech Republic, Sweden and Ukraine. 

It is not necessary to present proof of reciprocity for the agreements made with Germany, the United States and the United Kingdom. For other countries, the taxpayer must provide a copy of the law published in the official press agency of the country of origin of income, translated by a sworn translator and authenticated by the Brazilian Embassy or Consulate in that country. Another option is to obtain a statement attesting to the reciprocity of tax treatment from the Brazilian Embassy or Consulate in that country. 

Currency Conversion

Income received abroad, in addition to tax paid in countries with which Brazil maintains an agreement, should be converted into United States dollars (US$), in an amount set by the monetary authority of the country of origin of the income on the date of receipt and, subsequently, converted into Brazilian reals (R$) according to the dollar purchase price fixed by the Central Bank of Brazil for the last business day of the fortnightly period prior to the receipt of income. The same applies for converting amounts spent on deductible expenses.

For example, if a Spanish citizen, resident in Brazil, receives 1,000 euros on February 20 from the company in which he or she works in Spain, this amount must first be converted into U.S. dollars according to the current price in the European country for that date. The value of the dollar in Brazil for the last business day of the second fortnight of January must then be found in order to obtain to the amount in Brazilian reals.

Statement Of Brazilian Capital Abroad

In addition to the Annual Income Tax Return, a resident who possess, on December 31 of the previous year, assets and rights abroad in an amount greater than or equal to US$ 100,000 (or its equivalent in other currencies) is also required to submit the Annual Statement of Brazilian Capital Abroad to the Central Bank. If this amount exceeds US$ 100 million, this declaration must be made quarterly.

The annual statement for 2012 must be submitted by April 5, 2013. Those who do not submit the statement in time, or send the document to the Central Bank with errors, may be subject to penalties. Those providing quarterly statements must access the Central Bank website (content in Portuguese) and follow the calendar with delivery dates. 

Sources: (content in Portuguese)
Federal Revenue Service 
Central Bank of Brazil