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Income tax

Income tax in Brazil

All about Income Tax 2020: what it is, and how to declare


Are you ready to declare your 2020 Income Tax (Imposto de Renda : IR) ? Between the months of March and April, the Brazilian population needs to file an income tax return. Indeed, all citizens with incomes above a certain amount must report to the Receita Federal do Brasil annually.

If you made certain investments last year, your income will also be taxed. To help you with your statement, we have put together some of the best tips on the subject in this article.

We cannot advise you strongly enough to be well informed to declare your expenses, avoid fines or any problems with the authorities.

Below, you will find out everything you need to know about the tax, including its relationship with investments.

What is an Income Tax ?


The Income Tax is a tax levied annually by the federal government on the earnings of individuals and companies. Its value is paid according to the declared income, so that citizens with higher income pay more taxes, while those with lower income pay less.

In practice, then, we can classify IR as an annual amount discounted on the earnings of workers and companies in Brazil. The list of taxable income includes earnings such as salaries, rents, lottery prizes and investments.

As the IR is a tax applied to citizens and companies, it is divided into two categories: the Personal Income Tax (IRPF) and the Corporate Income Tax (IRPJ). Next, we’ll share some details about each one.

Individual Income Tax (Imposto de renda pessoa fisica)

The Individual Income Tax is levied on the income and earnings of taxpayers residing in the country or abroad and receiving from sources in Brazil.

The rates vary according to income, so taxpayers who earn below the limit established for the mandatory presentation of the annual declaration are exempt from collection.

Corporate Income Tax (Imposto de Renda Pessoa Jurídica)

The Corporate Income Tax is intended for Brazilian companies. In this case, the applied rate is applied to the profit, which can be real, presumed or arbitrated, depending on the activity developed and the size of the business.

According to the Federal Revenue Service , taxpayers are, therefore, subject to the payment of the IRPJ, legal entities and individuals equivalent to them, domiciled in the country.

Since 1996, the IRPJ rate has been 15% on the profit assessed, with an additional 10% on the portion of the profit that exceeds R $ 20,000.00 per month.

Who needs to declare an Income tax ?


All taxpayers who had an annual income above the ceiling established by the Federal Revenue are required to declare Income Tax. This year, it corresponds to a remuneration of R $ 28,559.70 , which gives an average of R $ 2,379.98 per month.

Another mandatory case provided for in the rules includes those that received exempt, non-taxable or taxed income at source in an amount greater than R $ 40 thousand.

But many other Brazilians also have this commitment to the Lion – the animal chosen in the 70s as the IR mascot. So, if you are in doubt whether or not you need to declare your income tax as an individual, the tip is to check the rules stipulated by the Receita Federal do Brasil.

The answer will depend on the amount of income you earned in the past year and the financial transactions carried out.

If they are within the range stipulated by the government, you are required to deliver the declaration within the set deadline. Otherwise, you will be subject to a fine of a minimum of R $ 165.74 and a maximum of 20% of the tax due.

Rules of mandatory Federal Revenue

According to the Receita Federal do Brasil, taxpayers are obliged to declare income tax:

  • They received taxable income (such as salaries and rents), whose annual sum was over R $ 28,559.70.
  • They received income that was exempt, non-taxable or taxed exclusively at source (for example: labor indemnities, savings accounts or donations) in an amount exceeding R $ 40 thousand.
  • In any month, they obtained gains from the sale of goods or rights subject to income tax, such as properties sold at a profit.
  • They carried out operations on stock exchanges, commodities, futures and similar (investments).
  • In 2019, they had gross revenue in an amount greater than R $ 142,798.50 in rural activity.
  • On December 31, 2019, they had possession or ownership of goods or rights, including bare land, with a total value of more than R $ 300 thousand.
  • They became residents of Brazil in any month and, as such, were on December 31, 2019.

Income you must declare

You must declare everything you earned and paid in the previous year. It is necessary to report gains related to the sale of goods, rents, renovations in real estate and construction expenses. Alternative sources of income should also be listed.

In addition, the taxpayer must inform the Revenue of all assets and rights that were part of its assets until December 31 of the calendar year (if the fiscal year is 2020, the calendar year will be 2019).

In this category, vehicles and real estate (regardless of value), in addition to movable goods (such as jewelry or paintings with a value above R $ 5,000), which also need to be declared.

Even gains exempt from income tax, such as redemption of the Severance Pay Fund (FGTS), receipt of inheritance and income from lawsuits must be reported to the Receita Federal do Brasil.

The same goes for IR exempt investments, such as Savings Account, LCI and LCA.

It is also worth remembering that income linked to the PGBL pension plan will also be taxed by the IR.

Dependents on income tax returns

Those who declare dependents need to report any income from them. For example: if the child is an intern at a company, the father or mother must report his income in his statement.

Now, you already have a broad idea of ​​what you will need to declare: basically, everything you earned and paid in the previous year. The next step is more practical, check the correct way to make your statement to avoid any problems.

First of all, it is good to be aware of the deadline for sending the Income Tax 2020 declaration:  from March 2 to April 30 .

How to declare Income Tax in 2019 ?

Through the IRPF Program, you can make your income tax return online, by downloading it from the Revenue website. It is very easy to use and provides extensive help to the taxpayer. You can still choose to download to mobile, whether Android or iOS.

When filling out, there are two different modalities available to the taxpayer: the simplified and complete tax returns. The program itself suggests, as the fields are filled, which option is the best. But it is interesting to define in advance which one you think is most appropriate.

What investments do I need to declare in Income Tax ?


Investments must be declared in the Income Tax according to the income reports. They are provided by the financial institution that manages your application. Even IR-exempt investments, such as Savings and Mortgage Bonds (LCI), must be included in the document.

How to declare my investments in Income Tax ?


When filling in the data regarding your investments, it is essential to have information related to all your applications at hand.

Generally, the financial institutions themselves (banks and brokers) or even the stock exchange (Bovespa) make available to the investor a statement, called “Income Report”, which contains all the data about the values ​​to be declared.

You can receive this document by email, or consult it directly on the bank or broker’s website.

When making the statement, you need to be careful of other common misconceptions. A simple typo in the amount can make the Revenue suspect that you are evading taxes.

It should also be remembered that, although investments in LCI, LCA and Savings Account are exempt from income tax , they must be listed in your statement.

As for the others, it is important to be careful not to confuse the codes or inform them in the wrong fields, since the taxation for each one can be different.

In the case of LCI, it is important not to declare it as an FII, which is the Real Estate Investment Fund .

Another situation that requires attention from the investor is the income made and redeemed in the same year, which must be informed in the specific section “Income Subject to Exclusive / Definitive Taxation”. The initial value of the application does not need to be listed in the Assets and Rights section – what matters is to inform the profit obtained.

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