Each country that taxes income has its own rules on how to file the tax return. In most countries, it is customary to ask for information only on income. The Brazilian declaration is, in turn, much more complete in terms of what is reported within it, as it also compares the evolution of the taxpayer’s equity during the base period of the declaration.
The IRS wants to analyze not only the income, but also if the income that the person had is compatible with the increase or loss of equity that is being reported. If it is incompatible, the person may be asked to explain the difference in “fine mesh” inspection.
Is it more expensive to pay income tax in Brazil or abroad?
With regard to the tax burden itself, the maximum rate of personal income tax is 27.5% of income in Brazil, while other countries allow maximum rates of 40% to 60%. The higher the income tax rate in the foreign country, the less the chance that the person who has a double tax residency will have to pay income tax in Brazil on the same income from a foreign source.
It is worth saying that the opposite can also occur. There are countries where income taxation is lower or nonexistent (for example, United Arab Emirates). In this case, maintaining double tax residence means submitting the income held abroad to Brazilian taxation, and paying income tax in Brazil for such income.
For more information on this subject, I suggest reading the text “Living in Brazil and in another country: Dual Tax Residency, Brazilian Agreements and Reciprocity”, “Declaration of Definitive Departure from the Country in 2020: what you should know” and the content on “Taxation of foreign earnings and income”.
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