Income Tax

Good afternoon,

I have dual Citizenship in the United States and Brasil. I was born in Brasil and migrated to the U.S. at the age of ten with my parents. I retired from law enforcement last year after living uninterrupted for 40 years in the U.S.. I now have a retirement pension and I am currently residing in Brasil.
My question is: I am paying income tax already for my pension in the United States. Do I have to pay income tax again here in Brasil for the same money? and if so, do I have to pay for the entire gross amount of my check which is deposit directly in a Bank in the U.S. or do I only pay the taxes on the money that I bring into the country to cover my living expenses?

Any assistance that I can get on this matter will be highly appreciated.

Thank you

Hi Iralexandre1L76,

As a US citizen I'm sure you're already aware that regardless of where you live in the world you're still required to file your annual 1040 Income Tax return with the IRS. You are also required to report any Brazilian sourced income as part of your "Worldwide Income" when you file. Not that Uncle Sam is necessarily going to tax you on it, but they certainly want to know about it.

The United States does not have a Tax Treaty with Brazil, so there is absolutely no protection (other than what the US may offer) against double taxation, even on pension income from the USA. Your situation is even more complex because you are also a Brazilian citizen. Under the Canada/Brazil Tax Treaty for example, my pension income would be taxable in Brazil ONLY if I were to become a Brazilian citizen, as it is my Canadian pension income is only taxable in Canada because I am NOT a Brazilian citizen.

You are also required to file a DIRPF (Declaração de Impostos de Renda - Pessoa Física) once you become a (legal) permanent resident of Brazil, and in your case because you are also a Brazilian citizen. You are presently allowed to earn up to R$25.661,70 (USD $8,196.68 2014 income limit) exempt from income tax. I'm sure that your US pension would be considerably higher than that limit, so you're very likely going to have to pay tax on it in Brazil too. At the very least on the portion of your pension income over the basic exemption. Whether or not the IRS will allow you any deduction for taxes you need to pay on that income here in Brazil I do not know.

Also as far as I know you must declare on your DIRPF the value of any real property you presently own in the USA and in Brazil. Not that you're going to be taxed on the property you have in the USA, but rather to establish it's value because future capital gains upon the eventual sale will be taxable in Brazil.

Also as a US citizen you should be aware that Brazilian banks are required to report account information for all US citizens and deemed citizens directly to the IRS, thanks to the Foreign Accounts Tax Compliance Act - FATCA and Foreign Bank Account Reporting - FBAR.

This is exactly why most expats in Brazil use an international tax specialist to file their returns, both in Brazil and in their country of origin, since tax laws here are so complex and change constantly.

Sorry, since I'm not a US citizen this is the limit of my knowledge that would be of any help in your situation. I'd suggest that you consult with someone specialized in the area of international taxes. I'm sure H&R Block in Brazil is up to snuff on the overall situation and it might be worthwhile checking with them.

Cheers,
James     Expat-blog Experts Team