Living in Brazil but keeping an income source abroad

From  time to time, I have very interesting discussions with blog readers. Please check this one. You will learn a lot about Brazilian taxation and about international money transferences to Brazil. 

Dear Mr Adler,

With great interest have I heard about you.

As I have plans to immigrate to Brasil but keep working abroad i tried to find out about the brazilian tax system.

Since I will have an average income of above 10.000 USD a month I am curious to learn how much taxes I have to pay and if I can be hold reliable for direct taxes as well as indirect taxes?

Thank you for your time!

Sincere regards,

Daniel Dreiberg,

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Dear Daniel Dreiberg,

Thanks for the contact.

 Brazilian taxation would be hard on you: 27,5%.

 Maybe you should incorporate a company abroad, and receive dividends, in Brazil, from this company. This would lower the tax burden to about 15% (taxation over capital gains).

A company in Brazil, under the assumed profits system, would pay about 16-18% in taxes over the total revenues. 

This topic is complicated. Depending on the nature of your work/investments, the Brazilian government might think that the companies are not real, and thus apply the 27,5% taxation, as if it were personal income.

Regards,

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Dear Adler,

Thank you for the nice and helpful inputs in regards to set up an Offshore company.

Nevertheless I think we should compare the possibility to set up a Company in Brasil.

Although we have to pay 15% taxes in Brasil I am sure we are able to deduct several positions from the tax e.g. car, working office in the apartment, travel expenses, health insurance for my wife, as she will be employed as secretary, etc.

The advantage in that model is to have all in hand in Brasil and if necessary we can deal direct with the local authorities. As tax lawyer we would use your expertise.

The questions arising in founding a local Brazilian company are about the bank account.

Will the bank automatically change foreign currencies, e.g USD into local Reals?

Will the bank deduct a fee of 10 cents per USD?

How much of a charge are the transaction fees from Brasil to a foreign bank account e.g Germany?

 How often is a tax declaration necessary and how much is the tax adviser fee?

I believe to compare the advantages and disadvantages in both models we should find the solution which of the two possibilities might work best for me.

Thanks again for your advice

Sincere regards

Daniel

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Dear Daniel,

The 15% tax we talked about (actually, not 15%. A company would pay 16% to 18%) is a simplified rate, applied over the company's gross revenues, only when the company functions under the assumed profits system.

If you wish to keep a more detailed bookkeeping, we shall use the regular tax system. It is basically 34% over net profits, plus a 3,6% VAT over gross revenue. (The reality is far more complicated than that).

The bank will change USD to Reais automatically. A 0,38% tax is applicable over this operation.

The bank does not charge 0,10 cents per USD. But it will charge a conversion fee (sometimes 200 reais). Also, the bank uses the official exchange rate (there are some details about it that we must discuss).

You must hire an accountant, that will cost you about 350,00 per month. The accountant will take care of all tax assessments.

You must collect at least 60 USD every month as social security for the company director.

I hope this overview helps your decision.

Regards,

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See also:

International Bank Account Number (IBAN) - Sending money to Brazil

How to get cash back from Brazil to Europe

List of documents for setting up a company in Brazil