Foreign Income Tax for Individuals in Brazil

Juliana Mello

The Brazil Business

Updated

9 September 2012

Independent contractors, freelance professionals, people that receive money from abroad, among others have to pay the Brazilian Income Tax through the Carnê Leão also known as Darf. In this article, we explained everything you need to know about this specific tax collection system.

In Brazil, the Income Tax is collected monthly during the year. The taxpayer annually declares how much of Income Tax he paid during the previous year and send it to the Receita Federal, where the datum will be checked out to see if he is in debt or overpaid the tax.

The declaration of income for individuals in Brazil is all made through an online system. The taxpayer will download the IRPF program, and the Receitanet statement, the file responsible for sending the document to the Federal Revenue.

All individuals living in Brazil and falling under the categories stipulated by the Receita Federal must pay the Income Tax. Foreigners with assets in Brazil, must also declare their patrimony in the country to the Receita Federal in order to pay the taxes due. For that, they must issue a [CPF number](/article/cpf-for-dummies0. Check more information about it here

Companies automatically withhold the amount of Income Tax their registered employees must pay in a month by discounting the value from their wages (Withheld Income Tax). That way, people that do not work as registered employees must pay their Income Tax through a different system of collection: the Carnê-leão, also known as DARF.

What is Carnê-leão?

Carnê-leão is an alternative system for the monthly collection of Income Tax. This system is subjected to the taxpayers (individual persons) resident in Brazil that work as freelance or autonomous professionals or that receive income from abroad or even receive money through determined activities that will be specified in the topic below.

Who must pay the Income Tax through Carnê-leão?

Individual taxpayers who live in Brazil receiving income from abroad are subject to paying the Income Tax through the Carnê-leão. Falls under the category all the incomes received from:

• Work without employment ties, such as freelance or independent contractor jobs
• Rentals of immovable and movable property
• Leasing and subleasing
• Pensions, including alimony, even if the payment has been made through a legal entity
• Provision of services to embassies, consulates, diplomatic or technical missions or international organizations
• Provision of independent sales representative, an intermediary in conducting business on behalf of others
• Fees and expenses of clerks of Justice, as notaries, public officials and other servers, unless they are paid exclusively by public funds
• Provision of freight transportation
• Provision of passengers transportation services
• Income arising from the activity of auctioneer

It is important to say that, it doesn’t matter if the person already pays the Withheld Income Tax. If he receives incomes (apart his salary and above the minimum stipulated every year) from the list of economic activities above he must pay the Income Tax via Carnê-leão.

How much do I have to pay on Income Tax?

The minimum value received in a month that requires the payment of Income Tax changes every year as you can see: /article/rent-an-office-in-brazil). Below that value, the person is exempted from paying the Income Tax.

2012: BRL 1637,11

2013: BRL 1710,78

2014: BRL 1787,77

Every year, the Receita Federal divulges a progressive table with which the taxpayers can calculate the Income Tax they have to pay per month. Below, you can check the 2011 table, valid for the earnings of 2012.

How do I use this table?

Let us simulate the calculation of Income Tax to be paid by a person that monthly receives BRL 2.200.

1) BRL 2.200,00 (income - deductions) x 7.5% (aliquots) = BRL 165,00

2) BRL 165,00 – BRL 122,78 (total to be deducted) = BRL 42,22

The person of the example shall pay BRL 42,22 on Income Tax over the value of BRL 2.200 received. We supposed this person had no right for deductions, such as dependents and other expenses. But if he had, the value of it should be inserted in the equation in the place where the deductions word is written. The Calculation Basis is obtained by subtracting the deductions from the total income.

This calculation is not exclusive of the Carnê-leão collection system. All the collection systems for Income Tax on individuals are subjected to the very same aliquots and general rules. The only thing that changes is the payment method.

How to pay the Income Tax through Carnê-leão

The collection of the Income Tax through Carnê-leão is done online and it is very simple. First, the person downloads the Carnê Leão software, directly in the Receita Federal website.

Then, it is necessary to fill up some forms with personal data in the program, and add the incomes and deductions. The system will make the calculation. After getting the monthly calculation, the person will simply click on the print option, select the DARF tab and the month wanted. After printed, the DARF form can be paid at any bank.

The deadline for both the reporting of the foreign income and the payment of the corresponding tax is the last working day of the month following the month when the income was received. Foreign tax credits can in general be used to offset the Brazilian tax liability.

Deductions

The calculation basis subject to monthly incidence of Income Tax is determined by deducting the following parcels of taxable income:

• A certain amount for each dependent (this amount may change from year to year. The 2012 is BRL 164,20 per dependent)
• Contributions to the Social Security of the Union, States, Federal District and Municipalities;
• Expenses registered in Cash Book.

I didn’t pay my Carnê Leão, now what?

If you did not pay your last DARF as you should, it is important to know that is added an amount of interest on top of the original value. Each day that passes, the interests increase.

In order to calculate how much you owe, and generate a new DARF, the Receita Federal provides online the SICALC software, which aims to calculate and issue DARF automatically, including the calculation of interests. The program can be downloaded directly from the Receita Federal website.

Currently, the SICALC is on maintenance. So, the taxpayers can print the DARF using one out of the options below:

1) Extract DIRPF: see the "Statement of Charges Stated" to know the quantity of shares requested and the situation of each of them, and click on "Print".

2) Program for calculating and printing the Darf ou of the IRPF installments: click on "calcular" and follow the instructions for filling up data and printing Darf

3) Fill manually the Darf form (available on the Receita Federal website)