Taxes in Brazil

07/12/24 @TonyFaithOverFear.  Welcome!  I'm in the same position -- dual US-Brazil citizen, retirement and investment income in the US that I transfer monthly, little or no Brazilian income to speak of. 

Your US Federal Income Tax obligation will continue and you'll have a Brazilian income tax obligation, although thanks to Brazil's rules against double taxation, it will be reduced.  If you find a Brazilian accountant that you feel that you can trust after you move, that person will be able to help you keep everything straight.  Everyone's situation is different, but as a data point my Brazilian taxes for 2023 were about 40% of my US taxes. 

I'm no longer a resident of a US state, which is a savings.  I understand that California makes it unusually difficult to terminate residency.  Your US tax advisor may have some suggestions, although if you continue to maintain a residence in the state, dropping your residency may be impossible.

Great!!!! I will contact an accountant in Brazil to go over things once I'm settled in.

Thank you so much for the information.

@abthree Sorry to revive such an old thread, but I'm trying to do some research on this topic. Given that Brazilian tax brackets are so much lower than US ones can you elaborate a bit on how your Brazilian taxes are 40% of your US ones? My situation would be similar, living off of investments held in US investment accounts.

Completely understand everyone's situation is different, but I'm trying to get a sense of how much I should budget for taxes. Ballpark would be to transfer 3-4k USD per month to Brazil.

EDIT: Or, maybe since the retirement visa requirement is actually 2k per month that would be the amount that I would actually transfer.

Thanks so much.

08/10/24 @abthree Sorry to revive such an old thread, but I'm trying to do some research on this topic. Given that Brazilian tax brackets are so much lower than US ones can you elaborate a bit on how your Brazilian taxes are 40% of your US ones? My situation would be similar, living off of investments held in US investment accounts. Completely understand everyone's situation is different, but I'm trying to get a sense of how much I should budget for taxes. Ballpark would be to transfer 3-4k USD per month to Brazil. EDIT: Or, maybe since the retirement visa requirement is actually 2k per month that would be the amount that I would actually transfer.Thanks so much.     -@lalajaja

Hi!  No problem:  we don't consider a thread with current year activity to be  "old".  In fact at Expat.com we prefer for people with similar questions to post them on an existing thread if a relevant one exists, because that way similar information is gathered in one place.  We only ask people to consider starting a new thread if the LAST post is several years old; when the FIRST post was isn't that important.  That's because if the LAST post is several years old, there's a danger that a lot of the information is already outdated.

The United States, as you probably know, taxes the global income of all citizens and residents wherever they are in the world; there are ongoing lobbying efforts to change that, but they're not making much headway.  Brazil taxes global income of Brazilian residents, but has a constitutional bar on double taxation, so it attempts to reduce Brazilian taxes in consideration of taxes already paid on the same income to the country of origin. It doesn't end up being a 100% reduction, but that's why it's always less than my US taxes, I think.

Our Brazilian taxes are very simple now, because my husband has been getting his law degree and hasn't been working, so we have had no Brazil-generated income.  I file "Married -- Filing Separately" in the US (more on that below), and the equivalent of "Married -- Filing Jointly" in Brazil.  My US taxes are done before my Brazilian taxes every year, so my Brazilian accountant always has my US return as submitted in front of her when she's doing our Brazilian taxes, as well as the records of our funds transfers from the US, our yearend Brazilian bank balances, our Brazilian deductions -- principally the payments for our health plans and our IPTU (real estate tax) -- and the Brazilian exemptions.  I transfer the same amount in USD every month and have for the past seven years, but exchange rate variation makes my BRL income appear to fluctuate so every year is a little different, but not usually by a material amount.

Filing in the US as "Married -- Filing Separately" means that I pay more US taxes than I would if I filed as "Married -- Filing Jointly", but in the long view I think it makes the most sense for us.  My husband has never been a US resident and never expects to be, so I don't see any reason to expose his future earnings to IRS scrutiny, even as a memo number on my return.  He doesn't even have a TIN.  We actually tried to get him one on a visit to the US in 2018, but the person on duty at the IRS office in Raleigh, NC, was super-uncooperative.  I imagine that he was just trying to give the gay boys a bad hour, but he ended up unintentionally doing us a big favor.  As J. R. R. Tolkien wrote, "Oft evil will shall evil mar."  With my husband fully accredited as an attorney, our financial situation is about to change drastically.  I have NO idea what our taxes will look like next year (except that they'll be a lot more complicated and go up!), but they'll be easier to manage because all the changes will be on the Brazil side.

    @abthree Sorry to revive such an old thread, but I'm trying to do some research on this topic. Given that Brazilian tax brackets are so much lower than US ones can you elaborate a bit on how your Brazilian taxes are 40% of your US ones? My situation would be similar, living off of investments held in US investment accounts.
Completely understand everyone's situation is different, but I'm trying to get a sense of how much I should budget for taxes. Ballpark would be to transfer 3-4k USD per month to Brazil.

EDIT: Or, maybe since the retirement visa requirement is actually 2k per month that would be the amount that I would actually transfer.

Thanks so much.
   

    -@lalajaja

You do not have to transfer a set amount to Brazil. For the retirement visa, you have to show that you are able to transfer at least 2k USD to Brazil, but you don’t have to transfer this amount every month.  You transfer exactly as much or as little as you want or need  .

@abthree Thank you that's helpful. So, my understanding then is that your gross Brazilian taxes are actually higher, but you're able to deduct your US taxes, so the net amount is lower. That matches my expectation in that case. You essentially have to pay in total whichever is the higher of the two which is the Brazilian taxes.

I've seen discussions around Brazilian taxes in other places, and people seem to have the impression that they're lower than US taxes becuase the top marginal rate is less than the US. People don't seem to understand that you only pay that highest US federal rate if you make 500k+ USD per year. Even then you only pay that rate on the funds that exceed that amount. Also, crucially, the tiers for Brazilian taxes are very compressed versus US taxes. You hit the max Brazilian tier at 4,664 BRL per month which would put you near the very bottom of the US rates.

08/11/24 @lalajaja.  I think of it more like a normal US federal tax, and my Brazilian tax in place of a state tax, which I don't have because I cut loose from any US residence.  The net result is definitely "US tax plus something ", but it's significantly less than "US tax x 2".

So, about the Brazil double taxation laws: how exactly does the deduction work? Can you get money back for ANY taxes paid to the US? I ask because I'm self-employed with income going to US bank accounts from a US payment platform, so all my income I think needs to be filed monthly by Carnê-leão at 27.5%, which doesn't include social security. I'm pretty sure the US is gonna come gunning for me to give them their 15.3%. Is that deductible from my end-of-year taxes here in Brazil, even though it's SS and not income tax like carne leao?

I know the answer to this is "hire two accountants," but I figure it's worth asking here while I wait and the discussion of double taxation is happening.

08/12/24    So, about the Brazil double taxation laws: how exactly does the deduction work? Can you get money back for ANY taxes paid to the US? I ask because I'm self-employed with income going to US bank accounts from a US payment platform, so all my income I think needs to be filed monthly by Carnê-leão at 27.5%, which doesn't include social security. I'm pretty sure the US is gonna come gunning for me to give them their 15.3%. Is that deductible from my end-of-year taxes here in Brazil, even though it's SS and not income tax like carne leao?
I know the answer to this is "hire two accountants," but I figure it's worth asking here while I wait and the discussion of double taxation is happening.   

    -@amelie2301

Yes, two accountants (or at least on on the Brazilian side, if your US taxes are really simple and you do them yourself) probably is the final answer, but I think that I and others here can still give you some helpful hints.

To understand the US side, I highly recommend the book, US Taxes For Americans Abroad: The Easy Guide To Saving Money by Vincenzo Villamena and John Hamilton; it's available as a Kindle book.  Any book is general information and not personalized tax advice and should be treated that way, but I found it very helpful.

If you're using Carnê Leão for your Brazilian taxes, refunds work pretty much the same way that they do in the US, so you'll be refunded any overpayment after you file and there's nothing to worry about there.  When I wrote above that overpayments can be difficult to claw back, I was referring to a situation -- easy to fall into -- where an expat overstates her liability when she files, learns that she should have paid less, and has to file an amended return.  That's where things can get complicated, and a situation that your Brazilian accountant can easily help you avoid.  S/he can also help you set up your Carnê Leão to be closer to your actual liability, minimizing both your monthly payment and your eventual refund, if that's your preference. 

I can't tell you the details of how the double taxation avoidance mechanism works for US citizens (it changes by country, depending on whether or not Brazil has a tax treaty with the taxpayer's country; it does not with the US), because I don't know them.  The US will want ALL the taxes due on your US income, and give you a tax credit on any Brazilian income; Brazil will want ALL its taxes on any Brazilian income, and SOME on your US income, but less than it would if you weren't paying US taxes at all.  How "SOME" becomes a number is something I leave to my accountant.

I keep mentioning "Brazilian income" because, now that you are a resident of Brazil by virtue of family unification, you are no longer forbidden to earn income  from Brazilian sources as you were when your status was Digital Nomad.  This may or may not be of interest to you, but it's good to be aware of the option.

@abthree

Thank you for the very detailed reply. I'll have to check that book out!

And also, as is always advised, I spoke with an accountant. Apparently you can only apply *income* taxes paid to the US against your Brazillian *income* taxes. Because US self-employment tax is social security, I can't apply it against my Brazillian taxes. I also don't make enough money to offset the fees of running a business in the US, or in Brazil, so my total tax burden is around 40.3% (Carne Leao averages out to 25%, US self-employment is 15.3% with the FTC and standard deduction). Thankfully however I will only owe taxes on the income I make from here-on-out, so I don't have to retroactively scrounge up another 15.3% of my income so far.

08/15/24 @amelie2301.  You're welcome.  👍🏻 True, neither Brazil nor the United States consider Social Security contributions to be "taxes", since the money is being held in trust for you and will be returned to you with interest when you start collecting benefits.  You're only in a "double taxation" situation if you're paying income taxes to both countries.