Relevant Tax Aspects for Digital Nomads in Brazil
- May 9, 2023
By Michel Siqueira Batista, Vieira Rezende Advogados, Rio de Janeiro and Celma Hellebust, Hellebust International Consulting
Following a worldwide recent trend, Brazil has recently regulated the so-called digital nomad visa. This visa is very popular among those individuals who are able to work remotely and intend to explore new countries and cultures. Not by chance, being a digital nomad became a real lifestyle.
Notwithstanding, the Brazilian digital nomad visa is subject to some conditions. First of all, it consists of a 1-year temporary residence permit (extensible for another 1-year period), while tourist visas, for example, allow in general a 90-day stay.
On the other hand, the Brazilian digital nomad visa requires an employment relationship with a company abroad. Therefore, it does not apply to self-employed individuals or those with a Brazilian employer.
However, being a digital nomad in Brazil is not a costless dream. The reason is that Brazilian tax legislation adopts the worldwide income principle, according to which the individuals resident in Brazil for tax purposes are potentially subject to taxation on the income earned worldwide, despite it being maintained abroad. That means that if the digital nomad qualifies as a tax resident in Brazil, the salaries received from the employer abroad and gains and interests from investments are in principle taxable in Brazil.
In addition, a tax resident in Brazil is subject to other duties, such as filing annually (i) an income tax return and (ii) a report to the Brazilian Central Bank (in this last case, only if the total assets abroad are equal or greater than the equivalent to USD 1 million).
According to Brazilian tax law, a foreign individual with a temporary visa (which is the case of the digital nomad visa) becomes a tax resident the moment he completes 184 days, consecutive or not, in the Brazilian territory within a period of twelve months (or at the moment the visa is converted into a permanent visa). Therefore, if the intention is to stay in Brazil for a period longer than 184 days (note that a digital nomad visa allows travel to other countries), one must pay attention to the tax aspect.
Digital nomads coming from countries that have executed a double taxation treaty with Brazil (such as the case of Norway) may have additional protection against Brazilian taxation if they are also considered tax residents in their country of origin, since in the case of virtual double residence the tax treaties establish that the tax status is determined according to the following progressive criteria (in case the first criteria does not solve the situation, apply the next, and so on):
- (i) where the individual has a permanent home;
- (ii) where the personal and economic relations are closer (center of vital interests);
- (iii) where the individual has habitual abode; and
- (vi) the State of which he is a national.
Finally, in case the individual becomes a tax resident in Brazil, he might become a nonresident immediately (i) at the moment he leaves Brazil, as long as he communicates his new status to the tax authorities, or (ii) after completing 12 consecutive months abroad.
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