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Tax system in Rio de Janeiro


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In Brazil, the major tax guidelines are defined by the 1988 Federal Constitution (with the alterations by Amendment no. 3). Taxes are under the specific jurisdiction of the Union, States and Federal District and Municipalities. The Brazilian fiscal year begins on Jan. 1 and ends on Dec. 31.

Foreign nationals who are tax-resident in Brazil are required to pay tax on their Brazilian and overseas-generated income and must file an annual tax return every April. Foreign nationals become subject to tax-residence status if they stay in Brazil for more than 183 days in any 12-month period, and this status applies for 12 months after their last departure from Brazil. Foreign nationals who are not tax-resident are required to pay tax only on their income from Brazilian sources, at a rate of 25% on earned income and 15% on unearned income. They do not have to file an annual tax return.

There are several countries that have an agreement with Brazil so their citizens can avoid Double Taxation. These include: Argentina, Austria, Belgium, Canada, Chile, China, Czech Republic, Denmark, Ecuador, Finland, France, Hungary, India, Israel, Italy, Japan, Luxembourg, Netherlands, Norway, Philippines, Portugal, Slovakia, South Korea, Spain, Sweden, and the Ukraine.

Individual

Brazil's individual income tax rates for 2010 are progressive, from 7.5% to 27.5%.
Income of R$1-17,208 = 0 percent
Income of R$17,209-25,800 = 7.5 percent
Income of R$25,801-34,392 = 15 percent
Income of R$34,393-42,984 = 22.5 percent
Income of over R$42,984 = 27.5 percent

Individuals: Pay 15 percent tax on capital gains, dividend income from local companies is tax exempt

Deductions

  • For Brazilian residents, the first annual income of BRL 17,208 is tax exempt.
  • There is a standard monthly deduction for each dependant.
  • Education expenses are deductible
  • Deductions are also permitted for social security payments by an employee, payments to private Brazilian pension plans, and for alimony payments.

Corporate

Corporate Tax: Brazil's corporate tax rate for 2009 is 34 percent. The tax consists of a basic tax of 15 percent. There is also a surtax of 10 percent for annual income of over BRL 240,000, about $110,000. Additional 9 percent are added for social contribution on net profits.

Capital Gains: Capital gains of companies are added to the regular income.

Deductions

  • Losses are carried forward indefinitely. In future years only 30 percent of the current year taxable income can be set off against the loss.
  • Depreciation is deducted using the straight line method. Companies working in 2 shifts can claim 150 percent of the standard rates, while companies working in 3 shifts are entitled to 200 percent of the standard rates.
  • Companies involved in development of technical research can use accelerated depreciation for tax purpose.
  • There is no company consolidation for tax purpose.

Value Added Sales and Services Tax/Excise Tax

Brazil does not have VAT. The Brazilian tax regime for sales and production is not similar to those of Europe. Two types of value added type taxes exist in Brazil: value added sales and services tax (ICMS) and excise tax (IPI).
ICMS- (1) a tax on "circulation" of goods, (2) a tax on interstate and intercity transportation services and (3) a tax on telecommunications services. This is a state tax and is 25 percent.
IPI- This is a federal tax over industrialized products. It is 12 percent for domestic goods. This rate can be as much as 60 percent for imports.
ISS - This is a city tax over any service and is 5 percent.

Social Security Tax

Employer: 37.3 percent of the gross salary comprising 28.8 percent social security and 8.5 percent for severance fund.

Employee: 7.65 to 11 percent of the gross salary. The employee's payment, which is capped, is based on a contribution salary table, provided by the government.

For a complete description of Brazil's taxes, go to their Secretariat of the Federal Revenue of Brazil page, www.receita.fazenda.gov.br.

Update 29/05/2010


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