Tax Figures
Corporate Income Tax
The rate of corporate income tax (IRPJ) is 15% of taxable company profits. There is also a surtax of 10% on annual income that exceeds BRL 240,000.
Brazilian companies can choose to pay taxes based on their actual or presumed income. Under the “lucro real” method, the corporate tax is based on actual annual or quarterly taxable income. The “lucro presumido” method (available if certain requirements are satisfied) is based on a deemed taxable income or income estimated on a quarterly basis.
Income Tax Rate
- BRL 0 – BRL 21,453.24: 0%
- BRL 21,453.24 – BRL 32,151.48: 7.5%
- BRL 32,151.48 – BRL 42,869.16: 15%
- BRL 42,869.16 – BRL 53,565.72: 22.5%
- Above BRL 53,565.72: 27.5%
Taxpayers in Brazil have an option of electing the standard annual deduction of 20% of taxable income (not more than BRL 16,595) instead of usual deductions based on particular costs. There is a flat rate of 25% (on earned income) or 15% (on other income, except dividends paid from a Brazilian entity, which are tax-exempt) for non-residents of a non-treaty country.
Payroll Tax
See social security section below.
Sales Tax
There is a multiple rate VAT system in Brazil, with tax imposed at the federal, state and municipal levels. Industrialised Products Tax (or IPI) is a federal excise tax, which is levied on the manufacture of goods and the import of goods into Brazil. The rate of IPI is 20% on average depending on the type of commodity.
Merchandise and Services Circulation Tax (also known as ICMS) is a VAT imposed at the state level on the circulation and import of goods and the provision of interstate and intercity communication and transportation services. ICMS rate range from 4% to 25%.
Exports are exempt from Value Added Tax.
Withholding Tax
There is no withholding tax on dividends distributed to a nonresident that are paid from profits earned from the 1st January 1996.
A 15% withholding tax is imposed on the interest paid to a nonresident, unless there is a tax treaty that reduces the rate (the same rate applies to royalty payments and technical service fees). This rate is increased to 25% if the recipient of interest is resident in a tax haven. There is also a 25% tax levied on the payments for technical services that do not involve the transfer of technology.
Other Tax
Small enterprises that qualify and have annual gross income that does not exceed BRL 3.6 million may elect to be taxed under a simplified regime (for purposes of corporate income tax, federal social contributions on gross income (PIS and COFINS), federal excise tax (IPI), state VAT on sales and services (ICMS), tax on services (ISS) and social security contributions).
PIS/PASEP (social integration program) and COFINS (tax for social security financing) are federal taxes levied on gross revenue at rates of 0.65% (PIS) and 3% (COFINS), where a Brazilian entity pays corporate income tax under the deemed taxable income regime. When the corporate income tax is paid based on actual income, the PIS and COFINS rates are 1.65% and 7.6%, respectively. For the import of goods and services the PIS and COFINS are combined at a rate of 9.25% (or 10.25%).
Time to prepare and Pay Taxes
2038 Hours
Tax Returns Supplied
Yes
Employers Social Security and statutory contributions
Employers contribute 8% of wages to each employee’s salary account to the severance fund. They also have to contribute 20% of an employee’s wages to the public pension system (National Institute for Social Security or INSS) as well as a rate ranging from 1% to 3% for risk of the activity to the health or safety of the employee. There are also additional social security contributions (also known as “s” system contributions), which are approximately 5.8%. For certain business industries, the 20% INSS contribution has been replaced by a rate imposed on gross revenue.
Employees Social Security and statutory contributions
Social security contributions are imposed on employees at rates that range from 8% to 11% based on their remuneration. The maximum required monthly contribution is BRL 482.93.
Contributions of self-employed individuals are calculated at a rate of 20% of their base salary, which is fixed by the government at a value that will depend on the date when the self-employed individual joined the social security system. The maximum monthly contribution for this category is BRL 878.05.
Payroll
There are specific rules for payroll and taxation in Brazil, including registering with numerous tax agencies that govern the 16 most common types of taxation. The primary concerns for a foreign company that needs to comply with tax laws in Brazil are: individual income tax for employees in Brazil, social security costs, payroll tax, sales tax, withholding tax, business tax and permanent establishment concerns.
Remote Payroll
A remote payroll in Brazil is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Brazil. One option for a non-resident company to payroll its employees (local and foreign) in Brazil is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf.
Local Payroll Administration
In some cases, a company will register their business in Brazil under one of the forms available, but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Internal Payroll
Larger companies with a commitment to Brazil may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Brazilian payroll, and can fulfill all tax, withholding, and payroll requirements.
This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Brazilian employment laws.
Currency
Real (R$), BRL
