Brazil

The country profile includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by the employers. Results reported include the average and marginal tax burdens for eight different family types.

It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

  
Brazil 2013
Tax / benefit of single persons

Wage level (% of average wage)

67

100

167

67

Number of children

0

0

0

2

1.

Gross wage earnings

15 200

22 686

37 886

15 200

2.

Standard tax allowances

3 040

4 537

7 577

5 495

Basic allowance

0

0

0

0

Married or head of family

0

0

0

0

Dependent children

0

0

0

4 127

Deduction for social security contributions and income taxes

1 368

2042

4 167

1 368

Work-related expenses

0

0

0

0

Other

0

0

0

0

3.

Tax credits or cash transfers included in taxable income

0

0

0

0

4.

Central government taxable income (1-2+3)

12 160

18 149

30 308

9 704

5.

Central government income tax liability (exclusive of tax credits)

0

0

733

0

6.

Tax credits

0

0

0

0

Basic credit

0

0

0

0

Married or head of family

0

0

0

0

Children

0

0

0

0

Other

0

0

0

0

7.

Central government income tax finally paid (5-6)

0

0

733

0

8.

State and local taxes

0

0

0

0

9.

Employees’ compulsory social security contributions

Gross earnings

1 368

2 042

4 167

1 368

10.

Total payments to general government (7+8+9)

1 368

2 042

4 901

1 368

11.

Cash transfers from general government

0

0

0

0

For head of family

0

0

0

0

For two children

0

0

0

0

12.

Take-home pay (1-10+11)

13 832

20 644

32 985

13 832

13.

Employer’s compulsory social security contributions

5 198

7 759

12 957

5 198

14.

Average rates

Income tax (7 / 1)

0.0%

0.0%

1.9%

0.0%

Employees’ social security contributions (9 / 1)

9.0%

9.0%

11.0%

9.0%

Total payments less cash transfers [(10-11) / 1]

9.0%

9.0%

12.9%

9.0%

Total tax wedge including employer’s social security contributions [(10+13-11) / (1+13)]

32.2%

32.2%

35.1%

32.2%

15.

Marginal rates

Total payments less cash transfers: principal earner

9.0%

9.0%

17.0%

9.0%

Total payments less cash transfers: spouse

N.A.

N.A.

N.A.

N.A.

Total tax wedge: principal earner

32.2%

32.2%

38.2%

32.2%

Total tax wedge: spouse

N.A.

N.A.

N.A.

N.A.

Brazil 2013
Tax / benefit of married couples

Wage level (% of average wage)

100-0

100-33

100-67

100-33

Number of children

2

2

2

0

1.

Gross wage earnings

22 686

30 172

37 886

30 172

2.

Standard tax allowances

8 233

12 338

12 338

6 579

Basic allowance

0

0

0

0

Married or head of family

2 064

0

0

0

Dependent children

4 127

4 127

4 127

0

Deduction for social security contributions and income taxes

2 042

2 641

3 410

2 641

Work-related expenses

0

0

0

0

Other

0

0

0

0

3.

Tax credits or cash transfers included in taxable income

0

0

0

0

4.

Central government taxable income (1-2+3)

14 453

17 834

25 548

23 593

5.

Central government income tax liability (exclusive of tax credits)

0

0

0

0

6.

Tax credits

0

0

0

0

Basic credit

0

0

0

0

Married or head of family

0

0

0

0

Children

0

0

0

0

Other

0

0

0

0

7.

Central government income tax finally paid (5-6)

0

0

0

0

8.

State and local taxes

0

0

0

0

9.

Employees’ compulsory social security contributions

Gross earnings

2 042

2 641

3 410

2 641

10.

Total payments to general government (7+8+9)

2 042

2 641

3 410

2 641

11.

Cash transfers from general government

0

796

0

0

For head of family

0

0

0

0

For two children

0

796

0

0

12.

Take-home pay (1-10+11)

20 644

28 328

34 476

27 532

13.

Employer’s compulsory social security contributions

7 759

10 319

12 957

10 319

14.

Average rates

Income tax (7 / 1)

0.0%

0.0%

0.0%

0.0%

Employees’ social security contributions (9 / 1)

9.0%

8.8%

9.0%

8.8%

Total payments less cash transfers [(10-11) / 1]

9.0%

6.1%

9.0%

8.8%

Total tax wedge including employer’s social security contributions [(10+13-11) / (1+ 13)]

32.2%

30.0%

32.2%

32.0%

15.

Marginal rates

Total payments less cash transfers: principal earner

9.0%

9.0%

9.0%

9.0%

Total payments less cash transfers: spouse

-2.6%

8.0%

9.0%

8.0%

Total tax wedge: principal earner

32.2%

32.2%

32.2%

32.2%

Total tax wedge: spouse

23.5%

31.4%

32.2%

31.4%

The national currency is the Real (BRL). In 2013, the average exchange rate was BRL 2.16 to USD 1. In that year, the average worker earned BRL 22 686.

The Report includes estimates of the tax wedge over the whole of the income distribution ordered by deciles of total labour income of formal wage earners derived from the household surveys.

Deciles of Incomes

1

2

3

4

5

6

7

8

9

10

Local currency (BRL)

7 760

8 389

9 454

10 782

12 359

14 728

17 401

22 196

31 104

75 530

USD1

3 600

3 892

4 386

5002

5 734

6 833

8073

10 298

14 431

35 042

Dollars in PPP2

4 841

5 233

5 898

6 726

7 710

9 188

10 855

13 846

19 403

47 118

Ratio to the minimum wage3

1.0

1.0

1.2

1.3

1.5

1.8

2.1

2.7

3.8

9.3

1. Average official exchange rates published by the central bank.

2. Calculated using the implied conversion rate (national currency per current international dollar in purchasing power parity) published by the IMF in the World Economic Outlook dataset.

3. Ratio of the income decile to official minimum wage of the country.

1. Personal income tax system

The fiscal year is the calendar year.

1.1. Central government income tax

The personal income tax is levied on wages, capital gains, pension income and all types of profits.

In the context of employment, the income tax is applied on wages, salaries, subsidies and vacation remuneration or any other benefits received in exchange for labour services. It is also applied to the profits made by a worker in exchange for services or self-employment.

1.1.1. Tax unit

In this report, it is assumed that members of the family are taxed separately. In practice, spouses may opt to file a joint tax return for the household.

The personal income tax applies to all residents and non-residents receiving an income in the country.

1.1.2. Tax allowances and tax credits

1.1.2.1. Standard tax allowances and tax credits

The Brazilian tax code establishes two alternative mechanisms to establish deductions. The first one is a percentage of the taxable income up to a ceiling and the second involves the summation of individual amounts. The taxpayer is entitled to deduct whichever of these two is the highest.

  • Individuals are entitled to a simplified deduction of 20% of the taxable income up to BRL 15 197.

  • Alternatively, individuals are entitled to deduct the sum of:

    • BRL 2 063.64 for the spouse.

    • BRL 2 063.64 for each child aged 24 years or less.

    • Employee social security contributions paid to the general government.

1.1.2.2. Main non-standard tax allowances and tax credits

  • Medical expenses incurred by the taxpayer or his/her dependents that are not reimbursed through a healthcare insurance program.

  • Amounts paid in alimony.

  • Contributions to privately managed Brazilian based pension funds.

  • Contributions to the Individual Retirement Program (FAPI) up to 12% of the taxable base.

  • Annual education expenses up to BRL 3 091.35.

  • Social security contributions paid on behalf of a maid who works at the taxpayer’s household.

  • Contributions to the cultural, sports and children’s fund up to 6% of the income tax due.

1.1.3. Tax schedule

The annual income tax liability was calculated on the taxable income according to the following schedule in 2013:

Income (BRL) up to

Marginal rate (%)

20 529.36

0.0

30 766.92

7.5

41 023.08

15.0

51 259.08

22.5

above

27.5

1.1.4. State and local taxes

No state or local taxes are levied on wages.

2. Compulsory social security contribution to schemes operated within the government sector

2.1. Employee contributions

Program

Marginal rate (%)

Old age, disability and death program

8 – 11

Employee social security contributions were levied on the gross income of the individual according to the following schedule in 2013:

Income (BRL) up to

Marginal rate (%)

14 972.40

8

24 954.00

9

49 908.00

11

The lower threshold for contributions was set at BRL 14 972 and the ceiling at BRL 49 908.

2.1. Employer contributions

Employers were required to make contributions to the following public programs.

Program

Marginal rate (%)

Old age, disability and healthcare programs

20.0

Work Injury

1.0

Education wage

2.5

FGTS

8.0

National Learning Service

1.0

Social Service

1.5

National Institute for Colonisation and Reform (INCRA)

0.2

The employer contribution rates are applied to the payroll. The ceiling for the contributions was BRL 49 908.

3. Universal cash transfer

3.1. Amount for spouse and for dependent children

Income (BRL) up to

Amount per child

7 758.60

397.92

11 661.36

280.32

Above

0

4. Main changes in tax/benefit since 2013

The annual tax schedule was updated as follows for 2015:

Income (BRL) up to

Marginal rate (%)

22 449.13

0

33 477.72

7.5

44 476.74

15.0

55 373.55

22.5

above

27.5

5. Memorandum items

5.1. Identification of an AW

The data refer to the earnings of workers within the formal sector. The average worker’s wage was calculated using microdata from the national household surveys.