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Business Taxation for Expats in Brazil

Submitted: April 2014

The authority responsible for Brazilian tax is the Ministério da Fazenda (MF). The website for the MF is here.

Registration
For expats, a common form of business structure in Brazil is the sociedade limitada (LTDA), which is essentially the same as a limited liability company. An LTDA offers the advantages of:

  • no minimum capital requirement
  • a minimum of two partners; it can even have only one partner for up to 180 days
  • no requirement for issuing financial statements, and
  • liability limited to the paid-in capital.

There is also the empresa individual de responsabilidade limitada (EIRELI), which could be described as a one-person LTDA, as only one person holds the entire share capital. The difference is that the share capital must be fully paid, and cannot currently be less than 100 times the highest minimum wage in Brazil (R$724 for 2014).

Forming any one of these three companies means that your liability is limited to your equity in the company. The business income is taxed at the corporate tax rate.

The company formation and registration process in Brazil varies from state to state and can be quite time consuming. Currently, the fastest place to get registered is probably São Paulo as the process has been streamlined. If you want to register a company in São Paulo there is a useful guide to the steps necessary here.

Corporate Income Tax

The Brazilian tax year for companies runs from 1 January to 31 December. If a company’s accounting year is different to the tax year, its tax return period must be based on the tax year. Brazilian resident companies are liable for corporate income tax (IRJP) on their worldwide income.

The IRJP rate is 15% for taxable income up to R$20,000 per month; income above R$20,000 is taxed at 25%.

Companies must pay a social security contribution of 9% of net profit, which is increased to 15% for financial institutions.

Capital gains and interest are generally treated as ordinary income and taxed as such. Dividends received from other resident companies are exempt from tax. Companies must also pay tax on profits made by foreign arms of the company, irrespective of whether these profits are distributed or not.

Companies can pay corporate tax on either a quarterly or annual basis. If quarterly, it can be paid on an actual or estimated basis subject to certain conditions.

If it is quarterly-based on actual figures, the profit is calculated as if each quarter was a separate tax period, with a limited allowance for tax loss movement between quarters. If it is calculated on an estimated basis, the amount of tax payable is based on a percentage of turnover, generally ranging between 8% and 32% depending on the nature of the business. The final amount of tax payable or refundable is calculated on the annual return.

If it is calculated on an annual basis, payments must be made monthly based on that month’s profit and loss account. Tax losses can be carried forward, but there are restrictions on their use. The final amount of tax payable or refundable is calculated on the annual return.

Companies must file their Brazilian corporate income tax returns electronically by the last working day of June in the year following the fiscal year in which the income was generated.

 

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