Annually, taxpayers are required to provide information through the Statement of Annual Adjustment, to ascertain possible debits or credits they might have with the Federal Revenue. Here comes a guide that will explain how the declaration of income process goes in Brazil.
In Brazil, the Income Tax is collected this way: the taxpayer annually declares how much of Income Tax he owns and send it to the Federal Revenue, where the datum will be checked out.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.
After filling up the statement, using the name and CPF, the completed document is sent to the Federal Revenue through the Receitanet.
If internet is not an option, the taxpayers have the alternative to get the physical document to fill up, at any Caixa Econômica Federal or Banco do Brasil branch. The forms are only available in Portuguese and can only be filled with information in this language, as well as the computer program.
Every year, the rules, aliquots and deduction limits get a bit different. This article is based on the Income Tax 2012 regulations, that was done in the first months of the year.
Who have to declare income in Brazil?
All individuals that have some sort of income - as the result of work or the result of legal availability, such as employees with a formal contract or freelance professionals - are potential contributors to the Income Tax. And every year, these people are required to make the Statement of Annual Adjustment.
The first step is to verify which statement to make: if the annual adjustment of Income Tax Statement or the annual Exempt Income Tax Statement. Are required to send the Statement of Income Tax individuals who live in Brazil and:
- Received taxable income exceeding BRL 23.499.15 in the previous year
- Received exempt income, not taxable or taxed at source, in excess of BRL 40.000 in the previous year
- Have got a capital gain when selling goods or rights or conducting operations on the Stock Exchange
- Obtained, in rural activity, gross revenues exceeding BRL 117.495.75 or intends to compensate losses from previous years, in 2011 or later
- Obtained, until the last day of the previous year, possession or ownership of assets or rights, including land without buildings, totaling more than BRL 300.000
- Came to lived in Brazil in any month and in this condition was on last day of the previous year
- Used the money obtained from selling residential properties to buy another property within 180 days, opting for tax exemption on income levied on the gain on the sale
Who does not need to declare income?
- Anyone who does not fall under the requirements listed above.
- Anyone who falls under the requirements listed above, but is declared dependent on the declaration made by another person. In this case, should be informed their income, assets and rights
- Anyone who has obtained in the last day of the previous year, possession of properties or rights, that worth more than BRL 300.000, but which have been already declared by the spouse
Absolutely any income must be declared in the statement, even the ones exempt from taxes, such as:
- Income from wages up to BRL1638.11 per month
- Pensions up to BRL1,638.11 per month, and this value takes into account the sum of all retirement benefits received. Meaning that who gets two pensions of BRL 900, for example, is not exempt from taxation, because the total amount received exceeds the actual 1638.11.
- Payment of PIS / PASEP
- Gains and dividends from profits that have already been taxed at source such as prizes and real estate sales
- Gains on Savings Accounts, Real Estate Credit Note, Mortgage Note and Certificates of Real Estate Receivables
- Benefits provided by Social Security in case of death or permanent disability.
- Free plots cleared in rural activities.
- Receiving of previous notice, Guarantee Fund, labor indemnifications, sick or funeral aid
- Receiving of unemployment insurance
- Receiving of pension for people over 65 years, as long as they do not exceed BRL 1,638.11 per month
- Benefits of the Volunteer Dismissal Program
- Receiving pension service due to accidents or serious illnesses
- Gains by a citizen with actions and operations with gold on the stock exchange, whose monthly amount equal to or less than BRL 20.000, for all the shares and the gold, individually
- Refunds of Income Tax
- Scholarships of any kind
Types of declaration
The taxpayer will chose between those two types of declaration below:
Modelo simplificado (Simplified statement): The taxpayer let go of the deductions provided by law, in exchange of getting a discount of 20% of the taxable income declared in the statement. In this type of declaration the discount is limited to BRL 13.916.36.
Modelo completo (Complete statement): The taxpayer who opts for the complete model can throw all deductions required by law, such as payments for education, health and welfare, etc. There are no limits on the value of the deductions. The deduction cam be limited or limitless.
Medical expenses, contribution to the social security, expenses written in the cashbook and alimony.
- Deductions per dependent - BRL 1.889.65 each
- Education expenses – BRL 2.958.23 per person or dependent, per year
- Maid - BRL 866.60
- Private pension and retirement plans - up to 12% of taxable income
- Grants to fund educational - up to 6% of the tax calculated
Documents used for deduction
- Expenses statement of the cash book (for autonomous service providers)
- Receipts and invoices for medical services, dentists, physiotherapists and others related to health care
- Certificate of payment of educational institutions
- Certificate of payment for private pension and retirement plans
- Certificate of donations for tax incentives (Funds for Children and Adolescents, Rouanet, Audiovisuals, among others).
Individuals can include their dependents in the income statement. The dependents can be:
- The spouse
- Partner living together in a stable relationship for at least five years, or shorter period, if the couple had a son
- The child or stepchild of the taxpayer up to 21 years, or of any age, if physically or mentally incapacitated for work; or even 24 years if still attending to university or technical school in second grade
- A minor, up to 21 years, that the taxpayer create and educate, and which holds legal custody
- The brother, grandson or great-grandson without support from parents, which the taxpayer holds the custody, up to 21 years, or of any age, when physical disabled or mentally for the job; or even up to 24 years if still attending to university or technical school of high school;
- Parents, grandparents or great grandparents, if they have no income, or income lesser than the exemption limit monthly (BRL 1.566.61 from calendar year 2011);
- Absolutely incapable, to whom the taxpayer is a guardian or trustee.
Foreigners with assets in Brazil
Foreigners with assets in Brazil must declare their properties in the country to the Federal Revenue to pay the taxes due. For that, they must issue a CPF number.
Still in doubt?
The Statement of Income is known for generating a lot of questions. If you have any doubts that were not solved by reading this article, please write your question in the comment box below and we will try to answer.