Brazil is one of the most beautiful countries in the world. American expats living in Brazil face a lot of issues in regards to US expat tax returns. What is the Foreign Earned Income Exclusion? Do I have to pay foreign income tax as well as U.S. income taxes when I work in Brazil? How is my income taxed in Brazil? How can I minimize my tax liability as an American expat? What are Foreign Tax Credits? These are some of the common questions that we receive from our clients who reside in Brazil. The purpose of this guide is to provide an overview of the most popular questions from expats Brazil.
Expatriate Tax Rules and Returns for American expats Brazil
Americans living abroad still have to file US expat tax returns even if they don’t owe any taxes. Please read about penalties that American expats face if they don’t file US expatriate tax returns. However, American expats Brazil can minimize US tax liability by utilizing certain exclusions and deductions under Internal Revenue Code section 911.
- Foreign earned income exclusion. American expats Brazil who qualify for this exclusion, can exclude up to $101,300 for 2016. Expats Brazil must be aware that a spouse can claim the same amount of exclusion if s/he has foreign earned income and meet the requirements.
- Foreign housing exclusion. Additionally, American expats Brazil may be able to exclude or deduct foreign housing expenses on US expat tax returns if they are eligible to claim the foreign income exclusion.
- Foreign tax credit. If American expats Brazil paid foreign income taxes, they can use a foreign tax credit to minimize your U.S. taxes. However, they cannot take foreign tax credits for taxes on income they have already excluded.
American expats Brazil have to file FinCEN Form 114 (FBARs) if they have financial accounts in Brazil or any other foreign country with an aggregate value over $10K at any time during the year. Filing the FBAR is done separately from US expat taxes.
Tax system in Brazil – FAQ
I am an American expat living in Brazil. Is my worldwide income taxed in Brazil?
If you are considered a tax resident in Brazil, then you pay a foreign income tax on your worldwide income. If you are a nonresident for tax purposes, then you are taxed only on your income from Brazil.
Who is considered a tax resident in Brazil?
American expats are considered tax residents if he/she has a temporary visa (no employment contract with an entity in Brazil) and has lived in Brazil for more than 183 days within any given period of twelve months. Also an American expat who has permanent visa or temporary visa (with and employment contract with an entity in Brazil) upon entering Brazil is a tax resident for tax purposes.
What is the tax year in Brazil?
The tax year in Brazil is a calendar year like in the USA.
What is an income tax rate in Brazil?
Residents are taxed on a progressive scale with tax rates of 7.5%, 15%, 22.5% and 27.5%. Income from overseas income outside of Brazil is subject to the compulsory monthly tax.
Which income is taxable in Brazil?
Taxable income includes employment earnings, fridge benefits, pension, capital and rental income.
As an American expat in Brazil, can I file a Brazilian tax return with a spouse?
Joint income tax returns are permitted in Brazil, however, if both husband and wife are employed, it might be more beneficial to file separately.
Is it a requirement to file a Brazilian tax return every year?
American expats in Brazil are required to file an annual tax return if they are considered residents for tax purposes.
Does Brazil have a tax treaty and social security agreement with the USA?
Reciprocal tax treatment is in effect between the USA and Brazil. Currently there is no social security agreement between the USA and Brazil.
These are some of the issues that American expats in Brazil should consider before filing US expat tax returns.
American expats who plan to move to Brazil or who have questions about US expatriate tax preparation, FBAR, FATCA, PFIC and other overseas tax issues, must consult an expat CPA or an expatriate tax professional that provides international tax services. Expat tax experts at Artio Partners are pleased to assist you with various topics in regards to US expat taxes.