Tax Resident and Non-Resident

In this text, we explain the Brazilian tax rules, for residents and non-residents with clarity and peace of mind!

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Author: Lucas Gomes Furtado

Who is considered a resident and non-resident by the IRS?

It’s very important to distinguish the difference between resident and non-resident for tax purposes in Brazil, to know the correct procedures to be taken with the IRS, which is the agency responsible for collecting federal taxes.

Tax Resident

The Tax Law considers a resident to be anyone who:

• Stays in the country for more than 183 days during the last 12 months, consecutive or not.
• Has companies or properties in the country or their main income from Brazilian sources
• Intends to stay in the country permanently.

The intention to remain in the country permanently can be proven using property acquisition or employment, Family, or social ties.

Tax residents must declare all income obtained in the country and abroad.

Non-resident tax

The fiscal non-resident is classified when he/she does not fit into any of the above conditions and stays in the country for periods of less than 183 days in a fiscal year. As for the declaration of the amounts, non-residents must declare only the income obtained in Brazil.

It’s worth pointing out that the conditions informed above are of extreme importance for tax purposes, as they impact the calculations and declaration of the Income Tax.

Moreover, the tax resident status may also have implications in other areas, such as obtaining a work visa and the possibility of access to some social benefits.

When it is necessary to make the definitive exit

The declaration of definitive departure from Brazil is indispensable When:

• the taxpayer no longer has the desire to return to the country and
• intends to obtain income exclusively abroad.

When opting for the definitive departure, the taxpayer must inform the Federal Revenue and obtain the “Communication of Definitive Departure from the Country” document, which demonstrates the condition of fiscal non-resident and terminates the tax obligations in Brazil.

Furthermore, it is crucial to know that if the individual decides to leave the country definitively, this may have other implications, such as the loss of social and labor benefits, like access to the Guarantee Fund for Length of Service (FGTS) and unemployment insurance.

Therefore, it is extremely important to carefully assess the implications of the definitive departure from the country and seek legal advice to ensure that all tax and legal obligations are correctly fulfilled.

Acquiring income exclusively abroad for Brazilian residents and non-residents

The acquisition of income exclusively abroad is a circumstance that can happen both to tax residents and non-tax residents. For those who qualify as tax residents, obtaining income abroad has to be declared in the Income Tax Return.

However, for those who qualify as non-tax residents, only income obtained in Brazil must be declared. Income obtained abroad is not taxed in Brazil.

In the case of Brazilians who move abroad and start to obtain income only outside the country, it is possible to request the Communication of Definitive Departure from the Country at the IRS. With this, you will be exempt from paying income tax on income obtained outside Brazil.

However, this does not exempt you from the obligation to pay taxes in the country where the income is obtained.

It’s therefore important to seek legal advice both in Brazil and in the country where the income is earned.

How to open a bank account in Brazil for non-residents

Opening a bank account in Brazil for non-residents can be a slightly more bureaucratic process than for residents. The documents required may change according to the bank.

Initially, it is necessary to have a valid passport and proof of address in the country you are in. In addition, banks may require other documents, such as proof of income and bank statements from foreign accounts.

Some banks require non-residents to have valid visas, while others do not. It is important to research the options available and choose the institution that best suits your needs.

It’s worth remembering that, even as a fiscal non-resident, the Brazilian government may still tax you in some situations, such as when selling goods or investments in the country. This is why it is necessary to seek legal advice.

How to open a bank account, if banks deny non-residents in Brazil

The best option is to find a reliable exchange broker or financial agent. Here at Koetz Law Firm, we work with professional partners of the firm who serve our clients with all the safety and reliability that the demand requires. Contact us for guidance.

Banks often have no interest in maintaining this type of account, because it is more bureaucratic, but even so, they follow legal rules to authorize or deny the account opening. In case of denial, the bank, by law, should inform the reason, but not always does so satisfactorily.

In case of a lack of documentation, the financial institution will give you a deadline to obtain this documentation and present it to the agency. In the case of non-justification, it is fundamental that the immigrant seeks legal advice to understand the options available to him/her.

One of the alternatives is to use digital banks. These are financial companies that offer digital banking services and usually have less bureaucracy for account opening, but the option of a trusted financial agent or exchange broker is much more efficient.

How Koetz Advocacia can help you with this account, how to make exchange operations with this account and what are the fees

Exchange operations with a bank account in Brazil can be performed by residents and non-residents, according to the rules of the chosen financial institution, following the rules of the Brazilian exchange legislation.

The fees for carrying out the operations may vary according to the bank chosen and the nature of the transfer. For example, for investment transfers, such as the purchase of real estate, the fees maybe 0.38% to 1.1% on the value of the operation.

For investment transfers, such as the purchase of real estate or the acquisition of shares in Brazilian companies, the limit is up to US$ 1 million per month. For maintenance transfers from residents abroad, such as the payment of personal expenses, the limit is up to US$ 3 thousand per month.
Besides the fees, both are subject to additional taxes and fees, such as the IOF (Tax on Financial Transactions), which varies according to the nature of the transfer.

To avoid difficulties with the IRS, it is important to justify the origin of the funds to be transferred and obtain the Declaration of Fiscal Regularity (DRF) of the bank transfers.

Koetz Law Firm assists its clients in all legal procedures, to avoid setbacks with the Brazilian agencies, which may make the transfer to Brazil or abroad difficult and to obtain the legalization documents of the foreigner.

How to justify the origin and obtain the declaration of tax regularity of bank transfers

The declaration of fiscal good standing is required for applications for business and real estate investor visas.

To justify the origin of the resources and obtain the Declaration of Fiscal Regularity (DRF) of the international transfers, it is essential to follow the rules of the financial institutions, something that Wise, Paypal, Western Union, and credit cards do not do when operating with values below 10 thousand dollars.

Residents and non-residents must prove the origin of the resources by presenting documents such as income tax returns, employment contracts, and rent receipts, among others. The original f resources must be verifiably Lithuanian.

In addition, it is necessary to have the Individual Taxpayer Registry (CPF) and inform the data of the exchange operation, such as the value and the purpose of the transfer.

After the operation has been carried out, the DRF can be obtained on the Federal Revenue website.