IT Contracting in Brazil - Money and Tax
Profile written by Matt Walters of Capital GES (September 2016)
Brazil’s robust economy has made it a new hotspot for contractor work. It boasts some of the world’s highest salaries. Today, Brazil’s economy is on the rise. Blessed with an abundant natural resource, Brazil has become the most powerful country in South America in economic terms and thus is leading the other countries of South America. Brazil's economy has been undergoing a continuous growth and development which has led to a rise in wages and employment.
Foreign nationals staying in Brazil for more than 90 days under a work visa must register with the police within 30 days of entry and obtain an RNE. Depending on the work visa type, the RNE is not required to begin work with the sponsoring employer. However, if the foreign worker is being added to a local payroll, a RNE is required prior to the enrolment. The RNE is also necessary for other formalities such as opening a bank account and obtaining a driver’s license.
Registration appointments are currently backlogged, therefore an appointment must be made as soon as the foreigner arrives in the country. Completion of the registration process is important as it ensures the individual’s ability to maintain legal status in Brazil, as well as his/her ability to extend status if required.
II. Taxation in Brazil
The Brazilian tax year is the calendar year, and tax returns must be filed by the last business day of April. Tax rates are banded between 7.5% and 27.5% dependent on income.
Brazilian tax allowances and deductions:
In calendar year 2012, individual taxpayers are allowed to deduct for each qualifying dependant the monthly amount of BRL 164.56 or the annual amount of BRL 1,974.72.
- deductible expenses relating to income from independent services;
- alimony and child support payments made under a court order or judicially validated settlement;
- monthly allowance per dependant of BRL 164.56;
- social security contributions paid to the National Institute of Social Security (INSS) and those paid to a third party, such as a house made, babysitter, etc.
- contributions paid to qualifying Brazilian private pension funds;
- pensions paid by the national, state or municipal social security system to persons older than 65 years up to BRL 1,637.11;
Deductions allowed in computing income subject to the annual tax include:
- substantiated non-reimbursed medical, dental and hospital-related expenses incurred by the taxpayer and the taxpayer’s dependents;
- Qualifying education expenses incurred by the taxpayer and the taxpayer’s dependants up to BRL 3,091.35.
III. Social Security
Companies must deduct from the employees’ salaries the amount related to the social security contribution owed by employees, and pay such amount to the National Institute of Social Security (INSS).
Social security rates for 2012:
- 20.00% paid by the employer based on gross salary paid to the employee
- 1.00%, 2.00% or 3.00% paid by the employer for Workers’ Compensation Insurance (SAT) contributions on the Payroll (depending on the level of accident risk relating to the company’s activity)
- 7.70% Maximum aggregate rates of contributions collected by the INSS and attributed to third official agencies, depending on the company’s business activities.
- 11% Maximum (ceiling) paid by the employee to the INSS fund (this deduction is conducted at source)
Companies also have to provide for potential severance pay for employees.
IV. Work permits
All Individuals (except nationals of Uruguay, Paraguay, Chile and Argentina) wishing to work in Brazil need a work permit (Autorização de Trabalho) and anyone applying for such a document must also obtain the appropriate immigration visa (Vista) which is applicable to their individual case.
There are many different types of Work visas and work permits, generally these can only be sponsored and requested by Brazilian-registered companies subject to local tax and work regulations.
To obtain a work visa, the application must be sent to the local Ministry of employment (Ministério do Trabalho e Emprego) office. Once the application has been approved, the approval is published in the Diário Oficial (Brazilian legal newspaper) and sent to the Ministry of Foreign Affairs. The Ministry of Foreign Affairs will then authorize the Consulate or Embassy to begin to process the work visa.
There are many different sub-categories for work visas which largely depend upon the type of work which is to be done.
Capital GES is an international payroll and contract-management company providing tailor-made tax planning services to contractors working overseas. For more detailed information on your personal situation, please contact Capital on +41 32 732 97 00.