Introduction To IRPF
In Brazil, there are three different types of taxes levied on income: the IRPF, the IRPJ and the IRRF. In this article, we will learn more about IRPF.
What is IRPF?
IRPF stands for Imposto de Renda de Pessoas Físicas, which is Portuguese for Individual Income Tax and is a federal tax collected by Receita Federal do Brasil - the Brazilian Federal Revenue Service. As its name states, IRPF is levied on all taxable income made in Brazil by individuals, whether they are living in Brazil or abroad.
The Individual Income Tax in Brazil is deducted from individuals monthly income. At the end of each year, the taxpayer have to declare the income they earned during the previous year to the Federal Revenue Service. The Statement of Income is normally due in March/April of the following year. Since 2013, the Federal Revenue Service only accepts Statements of Income submitted online and via smartphones and tablets.
On what is IRPF levied?
IRPF is levied on the following earnings:
- Labor income, from both paid and unpaid work
- Income from rent or royalties
- Judicial pension income
- Income made from rural activities
- Monetary correction of earnings
IRPF Exemptions
The following types of earnings are exempt from paying the IRPF:
- Income from wages below BRL 1.787,80 per month
- Pensions up to BRL 1.787,80 per month. This amount takes into account the sum of all retirement benefits
- Gains and dividends from profits that have already been withheld at the source such as prizes and sale of real estate
- Gains from savings accounts, real estate credit note, mortgage note and Real Estate Receivables Certificates
- Benefits from Social Security, such as for death or permanent disability, unemployment and sickness
- Income Tax refunds
- Scholarships, of any kind
- Sale of assets of small values - up to BRL 20.000
- Sale of a single real estate - up to BRL 440.000
- Meal and transportation tickets
- Employers' contributions to a private pension plan
- Gifts and inheritances
IRPF taxpayers
The taxpayers of the IRPF are those who have:
- Earned more than BRL 26.816,55 in 2014
- Earned more than BRL 40.000 exempt from taxation or withheld at the source
- Profited from the sale of assets subject to taxation, or performed operations in stock, commodities or future exchanges, in any month of the calendar year
- Had a gross revenue from rural activities above BRL 134.082,75
- Had or possessed goods or rights, including land, valued higher than BRL 300.000, on December 31st
It is important to mention that these values change every year, since the Federal Revenue Service has to adjust the values according to the new interest and inflation rates for the new year.
IRPF tax rate
IRPF employs a progressive tax rate system, meaning that people who make less money pay a lower tax rate. In the following table, we can see the IRPF tax rate depending on the calculation basis for the calendar year of 2014.
| Annual Calculation Basis - in BRL | Tax rate - in % | Amount to be deducted - in BRL |
| Up to 21.453,24 | - | - |
| From 21.453,24 to 32.151,48 | 7,5 | 1.608,99 |
| From 32.151,48 to 42.869,16 | 15 | 4.020,35 |
| From 42.869,16 to 53.565,75 | 22,5 | 7.235,54 |
| More than 53.565,72 | 27,5 | 9.913,83 |
The last column “Amount to be deducted - in BRL” refers to the deduction that has to be made after you have worked out how much IRPF is due. For example, if a person makes BRL 81.600,00 in a year, they should pay taxes of 27,5% which is BRL 22.440,00, then deduct BRL 9.913,83, making the total amount payable BRL 12.526,17.
Different types of income
The following types of earnings have different Income Tax rates applied to them.
For earnings on long-term funds and fixed income investments:
- 22,5% for applications with a term of up to 180 days
- 20% for applications with a term between 181 days and 360 days
- 17,5% for applications with a term between 361 days and 720 days
- 15% for applications with a term of more than 721 days
For earnings on short-term funds:
- 22,5% for applications with a term of up to 180 days
- 20% for applications with a term above 181 days
For earnings on Equity funds the IRPF rate is 15%.
For earnings on Variable Income Securities the IRPF rate is 0,005%.
For earnings on Overseas Remittances, the IRPF rate is:
- 25% on earnings resulting from paid work - with or without employment bonds - retirement, pension for death or disability, as well as provision of services paid, credited or delivered to non-residents in Brazil
- 15% on all other earnings that will be subject to overseas remittances
For other types of earnings:
- 30% on money prizes won in lotteries, sports contests and bingo, as well as collective bets on lotteries
- 20% on earnings resulting from sweepstakes, contests, lotteries, as well as on prizes distributed in the form of goods and services
- 1,5% on earnings made from advertising services
- 1,5% on remuneration of professional services