How are profits, earnings and activities of a non-resident in Brazil taxed?

The Brazilian tax system is, as known, very complex. Foreign nationals who are not tax-resident are required to pay tax only on their income from Brazilian sources (“imposto retido na fonte”), which can vary from 0% to 25%, depending on the circumstances and the country in which the person has the actual tax residence. For this category there is no need to file a Brazilian annual tax return.

Non-residents are subject to income tax in Brazil only if they are constantly obtaining profits in the country or if they come from Brazilian sources, and if there is a double-taxation treaty active between Brazil and the other country, these conditions will be governed almost entirely by the treaty itself.

As an example, some situations where a non-resident may encounter on its investments in Brazil may be taxed in the following manner:

Selling and buying assets: Tax rate of 15%, exemptions and reductions applicable to residents are not applicable

Labor and service compensation: Tax rate of 25%, except for technical and technical assistance services.

Royalties: 15% as the standard or 25% of the person is resident of a country with a favorable taxation system.

Fees related to the implementation of commercial and representative offices, warehouses and others: 15%.

Interest, commissions and discounts originated by international bill: 15%

Fees and commissions related to port activities on exportation procedures: 0%, or 25% of the person is resident of a country with a favorable taxation system.

Fees related to marketing, promotions and market research activities, rent and leases: 0%, or 25% of the person is resident of a country with a favorable taxation system.

Other earnings and profits: 15% as the standard or 25% of the person is resident of a country with a favorable taxation system.

The descriptions and definitions used on this matter are sometimes very vague, and consistent advice may render serious tax reductions. If you have any questions or a specific situation regarding this article, or if you want to know more about business and taxation in Brazil, please let us know, we would be glad to assist you on your endeavors in our country.