flag Brazil Brazil: Tax System

In this page: Corporate Taxes | Accounting Rules | Consumption Taxes | Individual Taxes | Double Taxation Treaties | Sources of Fiscal Information

 

Corporate Taxes

Tax Base For Resident and Foreign Companies
A company is considered resident in Brazil if it has been incorporated in Brazil, and its tax domicile is where its head office is located. The Brazilian legislation has a concept of "taxable presence" (instead of the more common "permanent establishment"), according to which a non-resident company may be treated as resident if it operates in Brazil either through: (a) a fixed place of business or (b) an agent who has the power to enter into contracts in Brazil in the name of or on behalf of the non-resident company.
 

Tax Rate

Corporate Income Tax (IRPJ) 15% - using either the "actual profits" method (APM) or the "presumed profits" method (PPM)
Surtax on companies with taxable profits over BRL 240,000 10%
Social Contribution Tax (CSLL - non-deductible) 9% (20% for financial institutions, private insurance companies and capitalisation companies)
Effective tax rate 34%
 
Tax Rate For Foreign Companies
Brazilian resident companies are subject to taxation on their worldwide income. Non-resident companies are generally taxed in Brazil through a registered subsidiary, branch, or permanent establishment, on their Brazilian-sourced income. Non-resident companies may also be subject to withholding tax (IRRF) on Brazilian-sourced income.
Capital Gains Taxation

Capital gains are treated the same way as ordinary income (subject to restrictions on the offsetting of capital losses against ordinary profits in certain cases).

Capital gains derived by a non-resident on an investment registered with the central bank are subject to progressive rates, as follows:

  • 15% until BRL 5 million;
  • 17.5% from BRL 5 million to BRL 10 million;
  • 20% from BRL 10 million to BRL 30 million;
  • 22.5% over BRL 30 million
  • a 25% rate applies if the gains are derived by a resident of a tax haven.
Main Allowable Deductions and Tax Credits
In principle, all the expenses necessary for company activity are deductible. Start-up and pre-operational expenses may be deferred and amortised on a straight-line basis over a period of minimum five years. R&D expenditures may be deducted when incurred or deferred until termination of the project and then amortised over a period of not less than five years, at the company's choice. Losses on bad debts are tax-deductible (conditions apply), except for those arising from inter-company transactions. Charitable contributions are deductible if the recipients are registered as charitable institutions (limits apply). Expenses of group medical care and health insurance programmes for employees, as well as contributions to private supplementary pension schemes are considered deductible if supplied to all employees indiscriminately. When properly documented and substantiated, travel expenses related to business activities can be deductible. Taxes, contributions and related costs are generally deductible on an accrual basis.

Tax losses can be carried forward indefinitely. Nevertheless, the loss carry-forward is capped at 30% of taxable income (before the deduction of net operating losses). Loss carryback is not permitted.
Exemptions and reductions of corporate income tax are provided for businesses in certain less developed areas. Foreign tax credit is available for resident companies on foreign income tax paid, generally limited to the amount of CIT and SCT on the foreign income.

Other Corporate Taxes

There are numerous other taxes levied in Brazil, including:

  • Municipal Property Tax (IPTU): levied annually based on the fair market value of property in urban areas. Rates depend on the municipality and location of the property
  • Tax on Financial Operations (IOF): levied on certain financial operations, such as loans, foreign exchange operations, insurance, and securities, as well as operations with gold (as a financial asset) and foreign exchange instruments. The applicable rate will vary depending on the operation, with the general rate set at 0.38%
  • Social Integration Programme (PIS) tax: a federal social contribution calculated as a percentage of revenue; it is levied at the rate of 1.65% (which may be reduced under certain circumstances)
  • Social Security Financing Contribution (COFINS): a monthly federal social assistance contribution calculated as a percentage of revenue, is levied at the rate of 7.6%
  • Import Tax: rates generally vary between 10% and 20% (the maximum being 35%)
  • PIS and COFINS on imports: 1.65% and 7.6%, respectively, for the import of services; 2.1% and 9.65%, respectively, on importation of goods
  • Municipal Service Tax (ISS): imposed on a cumulative basis (it is not creditable), and the rates may vary between 2% and 5%, depending on the type of service (rates to be stipulated on a municipal basis)
  • Social Security Contribution (INSS): generally levied at a rate of 20% over the employees’ payroll
  • Severance Pay Indemnity Fund (FGTS): levied on employee’s salary at the rate of 8%
  • Contribution for Intervention in the Economic Domain (CIDE): levied at the rate of 10% on remittances made by corporate taxpayers for royalties and for administrative and technical services provided by non-residents.
Other Domestic Resources
Federal Tax Revenue Authority
Doing Business: Brazil, to obtain a summary of taxes and mandatory contributions
 

Country Comparison For Corporate Taxation

  Brazil Latin America & Caribbean United States Germany
Number of Payments of Taxes per Year 9.6 28.2 10.6 9.0
Time Taken For Administrative Formalities (Hours) 1,501.0 327.5 175.0 218.0
Total Share of Taxes (% of Profit) 65.1 46.8 36.6 48.8

Source: Doing Business - Latest available data.

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Accounting Rules

 

Accounting System

Accounting Standards
Brazil adopted the IASB's International Accounting Standards on a gradual basis between 2008 and 2010. As a consequence, there are several important changes to the Brazilian accounting practices, the most important of which is that these new accounting practices are required not only in consolidated financial statements but also in the individual financial statements (Law 11638/07). These include the recognition of leasing transactions, depreciation treatment, the recognition of intangible assets, impairment concept etc.
Accounting Regulation Bodies
CFC, Federal Accountancy Council
Regulation of financial institutions, Internet Portal on Brazilian Accounting Resources
Accounting Law
Law nº 6.404 of 15 December 1976 (amended in 1997 by Law No. 9.457, in 2007 by Law No. 11.638 and in 2009 by Tax Law No. 11.941).
Difference Between National and International Standards (IAS/IFRS)
Brazil made the full adoption of IFRS in 2011.
Accounting News
Brazil Accounting News
 

Accounting Practices

Tax Year
From 1 January to 31 December.
Accounting Reports
Financial statements must include at least: a balance sheet, profit and loss statement, statement of cash flows and notes to the financial statements.
Publication Requirements
Commercial companies are required to annually publish a balance sheet, a profit and loss account and all the information necessary to understand the financial health of the company. The documents are required within the 60 days preceding the shareholders' Annual General Meeting.
 

Accountancy Profession

Accountants
There are no real differences compared with most other countries. Qualified chartered accountants, working independently or for an accounting practice, must certify the company accounts.
Professional Accountancy Bodies
CFC, Federal Accountancy Council
CPC, Accounting Pronouncements Committee
Member of the International Federation of Accountants (IFAC)
Yes
Member of Other Federation of Accountants
Member of IASB.
Audit Bodies
Independent auditors and international firms are registered with the Instituto Brasileiro de Contadores. Financial statements are controlled by an independent auditor registered with the 'Securities and Exchange Commission' or the 'Instituto Brasileiro de Contadores'. Approximately half of the audits in Brazil are carried out by international audit firms. The present trend is towards an increase in the number of companies audited, even those which are not required to be audited. The guarantee of quality arising from a certification represents a considerable advantage for Brazilian companies.
 
 

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Consumption Taxes

Nature of the Tax
ICMS (Tax on the circulation of goods and services), IPI (Tax on industrialized products), ISS (Tax on services), PIS-PASEP (Employees’ Profit Participation Program), and COFINS (Social Contribution for Social Security Financing).
Standard Rate
  1. ICMS rates vary across states from 17% to 35%. The standard rate is in 18% in Sao Paulo and 20% in Rio de Janeiro. Special rates apply to interstate sales (from 2019, the interstate ICMS is levied exclusively by the state of destination)
  2. IPI rates vary on how essential the product is considered to be, from 0% for the most essential and 300% for 'superfluous' or luxury items. The IPI tariff table contains more than 9,700 different classification codes and follows the Brazilian External Tariff Code (BTEC)
  3. ISS varies across municipalities, generally from 2% to 5% (maximum rate set by law)
  4. PIS-PASEP is 0.65% for taxpayers under the cumulative system and 1.65% for taxpayers under the non-cumulative system. Certain companies and products receive special tax treatment (such as the automotive industry which pays PIS-PASEP at a rate of 2% and COFINS at a rate of 9.6% on specific products).

Consult the Guide on Brazilian VAT to find import duty and taxes which apply to your product.

Reduced Tax Rate
For ICMS, generally lower rates apply to interstate sales, with a 4% rate applied on all interstate sales of imported goods.
COFINS and PIS may be reduced in certain circumstances (for example for financial revenues), and some transactions are exempt (e.g. exportation of services or assets fulfilling certain requisites).
Reduced rates generally apply to items of basic necessity (e.g. IPI applies at 0% to wheat and rice flour, 8% to pipes and 330% to luxury products; horticultural products and wheat flour are PIS-PASEP and COFINS zero-rated).
Exclusion From Taxation
Exports are generally exempt. Certain items are tax-exempt e.g. medicine from ICMS, wheat flour from IPI. ISS is not levied on the export of services.
Method of Calculation, Declaration and Settlement
Four types of value-added tax are in effect in Brazil, at federal, state and municipal levels: (i) State VAT (ICMS) applies to the circulation and importation of goods and the supply of interstate transportation, communication services and electricity; (ii) Federal VAT (IPI) is levied on "finished goods" that are moved in and out of the country; (iii) Municipal Service Tax (ISS), a sales tax payable to municipalities that applies to service not taxable by ICMS; (iv) Gross Receipt Contributions (PIS-PASEP and COFINS) levied on companies' gross revenues and imports. Companies must register with federal and state authorities to sell goods and with municipalities to provide services as well. In general, all the taxes are filed monthly.
Other Consumption Taxes
A tax on industrialised products (IPI) is also collected. An excise duty levied at the federal level, it applies to almost all sales and transfers of goods manufactured or imported in Brazil. The IPI rate can vary between 0% and 300% (between 5% and 15% on average). The least taxed products are basic foodstuffs, while the most taxed are alcohol and cigarettes.

A municipal property transfer tax (ITBI) is levied on the transfer of immovable property, with different rates according to the municipality in which the property is located.

PIS and COFINS are levied on imports at rates of 1.65% and 7.6%, respectively, for the import of services; and 2.1% and 9.65%, respectively, on importation of goods.

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Individual Taxes

Tax Base For Residents and Non-Residents
As per the Brazilian legislation, the following individuals are considered tax residents: naturalized foreigners; foreigners who hold a permanent visa or a temporary visa with a local employment contract from the date of arrival; Brazilian residents living abroad for the first 12 months subsequent to their departure when no exit process is filed; citizens of Argentina, Paraguay, Uruguay, Bolivia, Chile, Colombia, and Peru who claim temporary residence on the date the working relationship is established or on the date permanent residence is achieved; naturalised foreigners living in the country; and foreigners who hold a temporary visa, but no local employment contract, after completing 183 days of residence in Brazil within any 12-month period.
 

Tax Rate

Annual Taxable Income Rate
Below BRL 22,847.76 0%
From BRL 22,847.77 to 33,919.80 7.5%
From BRL 33,919.81 to 45,012.62 15%
From BRL 45,012.63 to 55,976.16 22.5%
 Over BRL 55,976.16 27.5%
 
Allowable Deductions and Tax Credits
When calculating monthly tax liability, the following expenses are deductible: social security and pension contributions to government entities, alimony and pension amounts decreed by court, dependent allowance (determined every year), tuition expenses (up to BRL 3.561,50 per dependant), medical expenses. Some deductions, such as those for dependants, alimony, and Brazilian official social security contributions are allowed on a monthly basis.

Some items can be deducted from the tax due rather than from the calculation base, such as: donation made to official government, state, and/or municipal child care entities and elderly fund; certain qualified contributions to cultural, audio-visual, and sports projects (capped at 6% of the tax due); contributions made by the taxpayer to the official social security system; contribution to health programs related to cancer and mentally handicapped support (capped at 1% of the tax due); private pension contributions made by the beneficiary and for one's dependents (capped at 12% of gross taxable income).

When calculating annual federal income tax liability, instead of itemised deductions taxpayers may elect for a standard deduction of 20% (up to BRL 16,754.34 in 2021, with this amount being reviewed each year).

Individuals with a business income (non-employees) may deduct the expenses necessary to produce the business' revenue, investments and expenses to maintain the business, and payments made to third parties who have an employment relationship with the respective payroll charges.

Special Expatriate Tax Regime
Resident individuals are taxed on their worldwide income. Non-residents are taxed only on income from Brazilian sources.

Non-residents of a non-treaty country are liable for a flat rate 25% tax on their income earned in Brazil (no deductions are allowed). Rental income received from a property located in Brazil is taxed at 15%. Income received abroad by non-residents is tax exempt.

Capital Tax Rate
Social security contributions on Brazilian-source income are due by employees each month, at the rate of 7.5% to 14% (with a maximum of BRL 713.08 per month). Self-employed individuals may pay 5%, 11%, or 20% of the ceiling contribution salary, according to personal and sectorial parameters.

Capital gains on the sale of real estate, vehicles and objects of art and collectables sold in Brazil or abroad; on stocks sold in foreign markets, as well as on interest income received from investments located offshore, are subject to a rate of 15%, and to progressive rates ranging between 17.5% and 22.5% for the portion of capital gain that exceeds BRL 30 million. Non-residents are only subject to capital gains tax resulting from the sale of assets located in Brazil.

A state estate and gift tax (Imposto sobre Transmissão Causa Mortis e Doações - ITCMD) of up to 8% is applicable on transfers of real estate by donation or inheritance. For resident foreigners and non-residents, this tax applies to assets located in Brazil only. In general, the rate is 4% in Sao Paulo and Rio de Janeiro.

A property tax (Imposto Predial e Territorial Urbano - IPTU) based on the fair market value of property in urban areas is levied annually at different rates depending on the municipality and location of the property (the basic rate for residential properties is 1%, 1.5% for commercial properties). The transfer of real estate properties is subject a municipal tax (Imposto de Transmissão de Bens Imóveis Inter Vivos - ITBI) of up to 3%.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
List of tax treaties signed by Brazil, Brazil has signed a total of 34 treaties to avoid double taxation and prevent tax avoidance
Withholding Taxes
Dividends: 0%; Interest: 15%/25% (for residents in tax havens); Royalties: 15%/25% (for residents in tax havens).
Bilateral Agreement
Italia and Brazil are bound by a double taxation treaty.
The double taxation treaty was signed on 03.10.1978, ratified by law L.29.11.1980-n.844 and came into force on 24.04.1981.
Withholding tax rates under the tax treaty are 15% for dividends, 0/15% for interest and 15%/22.5% for royalties
Download the treaty in English.
Download the treaty in Italian.

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Latest Update: May 2022