What is tax domicile?

In this article see what tax domicile is, and how you can choose your tax domicile or change it to another country, and what you can and can’t do after changing your domicile, being a non-resident.

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Author: Bianca Noronha

What is tax domicile?

The tax domicile can be understood as the place where the person concentrates his economic activities, having to account to the local authorities for taxation purposes, subjecting himself to the laws of the place.

In other words, to be a tax resident in Brazil is to be subject to Brazilian tax laws, being a way of regularizing yourself before the authorities. Tax domicile is also applicated in relation to states and municipalities.

In addition to demonstrating the desire of the interest to want to be linked to Brazil, we know that this makes life easier for those who wish to continue living or working on Brazilian soil.

And, if you are a foreigner and want to set up a company or want to work here in Brazil, achieving this status may be a necessity.

In this text, we list the main information on how to obtain the Tax Domicile in Brazil.

Cases where tax domicile is mandatory

There are some situations that make a person obligatorily considered a tax resident.

According to the Internal Revenue Service of Brazil, a person is considered a resident, for tax purposes, in the following cases:

1. When residing in Brazil permanently;
2. In providing services to autarchies or departments of the Brazilian Public Administration, even with civil domicile abroad,
3. Being a foreigner:

• From the date of your arrival in Brazil with a permanent visa;
• When entering Brazil with a temporary visa and completing 184 days, consecutive or not, of stay in the country, within a period of 12 months;

When establishing a tax domicile in Brazil is interesting

Are you a foreigner or Brazilian residing abroad and wish to:

• Enter into an employment contract on Brazilian soil (face-to-face or remote);
• Intend to exercise autonomous activity or as a liberal professional;
• Do you want to open a company on Brazilian soil;
• Want to acquire real estate or furniture on Brazilian soil;

In such cases, having a lawyer is the best option for you.

The authorities allow the non-resident to appoint an attorney (who, in this case, will be a person resident in Brazil) to fulfill and be responsible for his/her tax obligations. Preferably a specialized lawyer or law firm, which has judicial authorization for numerous procedures necessary for conducting business.

This is because, if you hire someone to be your procurator, on several occasions you will also have to hire a lawyer to accompany you.

Anyway, this attorney-in-fact will be the link between the non-resident and the Brazilian Authorities, thus granting the non-resident tax domicile in Brazil.

Can I choose a lawyer as a representative in the constitution of tax domicile?

At first glance, it might seem that lawyers cannot be tax representatives for non-residents.

Therefore, there is no problem in appointing a lawyer as your representative. This is even a common practice when individuals or legal entities wish to set up companies or invest in real estate in Brazil.

Depending on the objective of the non-resident, appointing a lawyer as a representative is ideal to streamline the entire process.

Means of obtaining the address to establish tax residence

A few years ago, it was necessary for foreigners or Brazilians residing abroad to own or rent property to establish their tax domicile in Brazil.

However, now there is the option of the virtual office.

The use of a virtual office as a tax domicile is already a practice adopted by companies that do not need their own physical space.

It must be a reliable virtual office, which is responsible for receiving and delivering correspondence immediately, in addition to being diligent with all personal information or the company it is hosting.

Moreover, it is also important that it has some time of existence or that it provides guarantees that it will remain in place for a long time.

If your goal is to open a company here in Brazil to work autonomously and remotely, this can be a great choice to lower costs.

Can non-residents open a bank account in banks in Brazil?

If you aren’t a resident and still want to move money to Brazil, you can choose to open a bank account at a Brazilian bank.

It’s possible to do this through a type of account called CDE (account for residents abroad), exclusively for those who don’t have a tax address in Brazil.

This account can be used to carry out various operations, like transfers, financing, deposits, and some specific types of investments.

On the other hand, not all banks offer these services, besides being tiring to open an account due to the various requirements presented by financial institutions.

For these reasons, the ideal is to have specialized legal advice and consultancy to avoid any type of problem when opening an account.

Will I be required to declare income tax if I become a resident?

As mentioned before, acquiring a tax domicile means that you have to comply with a series of tax obligations, and one of them is to pay taxes and declare your assets and income during the period of your domicile.

It’s important to comply with these obligations to avoid fines, and tax lawsuits and to remain regular.

When is it no longer necessary to pay tax in Brazil?

If you are a tax resident, wish to move to another country, and permanently terminate your relationship with Brazil, stop paying taxes, you must do the administrative procedure to stop being a tax resident in Brazil.

For this, you must deliver the Definitive Departure Communication, at the time of your output, and, subsequently, deliver the Definitive Country Departure Declaration referring to the period in which you were still a resident.

These two procedures must be delivered to the Internal Revenue Service of Brazil and must be planned to avoid overpaying taxes or failing to pay residual taxes due to lack of information, which in the future may turn into large amounts with fines and interest.

It is important for you to know that non-residents may be required to pay income tax if they obtain any type of income in Brazil, such as remuneration for work performed even remotely, renting a property they own in Brazil, income from investments or capital gains, or any other type.

In these cases, you must pay the Income Tax amount due immediately after receiving the amounts, through a payment slip called DARF.

It’s advisable to have specialized advice so that everything goes well.