The main guidelines for taxation in Brazil come from the Brazilian Constitution, which establishes the general principles, limitations on the power to tax, jurisdiction to tax at levels of government and tax revenue sharing provisions. Taxation in Brazil occurs at three levels of government: federal, state and municipal. In broad terms, the main federal taxes cover excise duties, import and export duties, financial transactions,taxes on revenue, profits and income, as well as contribution charges that fund social security and employment benefits, managed by the Federal Revenue Service. Corporate income taxes are levied only at the federal level (i.e. there are no state or municipal income taxes).
Companies resident in Brazil pay taxes on their worldwide profits. Foreign companies are only subject to tax if they engage in certain sales operations involving companies or agents resident in Brazil.
The Brazil tax year is the calendar year. Companies must file a paper annual tax return before the last working day of April each year. Tax return extensions are not possible.
Tax Rate for Foreign Companies
A foreign company is taxed only if it engages in specific sales activities in Brazil through a legally binding representative that is domiciled in the country, or a domestic branch. Foreign investors may also be subject to different capital gains rates on financial markets.
Capital Gains Taxation
Capital gains arising other than out of financial instruments are subject to income tax at 15%.
Tax rate applicable to capital gains is as follow as of 1 January 2017:
Main Allowable Deductions and Tax Credits
All the expenses necessary for company activity are deductible. Other deductible items include social security taxes, private pension contributions, alimony, qualifying educational and medical expenses and qualifying cultural contributions. Taxpayers may also elect for a standard annual deduction of 20% of taxable income, capped at BRL 16,754, instead of itemising deductions. Exemptions and reductions of corporate income tax are provided for businesses in certain less developed areas. Foreign tax credit is available for resident companies on foreign income tax paid, generally limited to the amount of CIT and SCT on the foreign income.
Other Corporate Taxes
There are numerous other taxes, including:
The following companies are obliged to submit their financial statements to the review of independent auditors:
For other companies not framed in any of the conditions listed above, the contracting of audit accounting is optional, which can be engaged at any time and according to the specific needs of each organization and their managers.
Many companies will hire audit services only for a specific purpose on a temporary basis, for example, in the process of acquisition, merging etc with other organizations. Also, Brazilian companies controlled by foreign companies generally are audited to meet statutory requirements or the demands of the parent companies.
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