Brazilian medium and large business owners who move abroad often have many doubts about their tax obligations. After all, leaving the country does not automatically mean being exempt from Brazilian Income Tax. In this article, we will clearly and objectively explain how the income tax declaration works for those living abroad but owning companies in Brazil under the Presumed Profit or Real Profit regimes. Topics covered will include the obligation to declare, differences when filing the Definitive Exit Declaration from the Country, taxation of Brazilian income after the move, obligations of businesses maintained in Brazil, step-by-step guidance on declaring from abroad, and the most common questions from expatriates. Finally, we emphasize the importance of working with an accounting firm specializing in international taxation, such as CLM Controller Accounting, to assist in this process.
Is the Income Tax Declaration Mandatory in Brazil for Those Living Abroad?
The obligation to submit the annual Income Tax declaration in Brazil depends on the tax situation of the business owner who has moved abroad. In general, if the business owner has NOT formalized their exit from the country with the Brazilian Federal Revenue, they will still be considered a tax resident in Brazil – even if living abroad – and must therefore file the Income Tax declaration in Brazil as usual, including all income earned both in Brazil and abroad. In other words, leaving Brazil without officially notifying the authorities does not eliminate tax obligations: you remain subject to the same rules applicable to residents in the country.
On the other hand, if the business owner has formalized their definitive exit from Brazil, becoming a non-tax resident, they are no longer required to file the annual Income Tax declaration starting the following year. In this non-resident status, the person is exempt from submitting the regular Annual Adjustment Declaration. However, attention: this does not mean that all taxes are over – income from Brazilian sources may still be subject to withholding tax (we will discuss this later), and there are formal procedures to follow to regularize as a non-resident.
To summarize this point simply:
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Without formal definitive exit: remains a tax resident in Brazil and needs to file the Income Tax declaration annually, if meeting the mandatory conditions (such as income above the exemption limit, assets over R$300,000, etc.).
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With formal definitive exit: becomes a non-tax resident and is no longer required to submit the annual IR declaration from the time of exit, except for the special exit declaration (submitted once). Their income in Brazil will be taxed exclusively at source, without the need for annual adjustment.
It is important to highlight that simply moving to another country is not enough to change your status with the Brazilian tax authorities. You must follow the legal procedures for exiting in order to cease being a tax resident, as we will explain next.
Definitive Exit Declaration vs. Maintaining Tax Residency
A crucial step for those planning to live abroad is deciding between filing the Definitive Exit Declaration or maintaining tax residency in Brazil. This decision has important consequences:
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Definitive Exit Declaration: This is a special income tax declaration submitted in the year following departure, with the aim of informing the tax authorities that you have left Brazil permanently (i.e., for a period longer than 12 months). By submitting it, you terminate your tax residency in Brazil as of the exit date, becoming a non-resident. This means you no longer need to file future annual declarations, and your income from Brazilian sources will be taxed exclusively at source, according to non-resident tax rules. To complete this step, the taxpayer must also file the Communication of Definitive Exit (an informational form submitted by the end of February in the year following departure), which notifies payers of income about the change in tax residency and allows them to withhold taxes correctly as a non-resident. In short, the definitive exit formalizes your status as an expatriate and officially marks the moment you ceased being a resident for tax purposes.
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Maintaining Tax Residency in Brazil: This means not filing the definitive exit declaration, either due to uncertainty about the permanence of your stay abroad or by choice. In this case, during the first 12 months abroad, you are considered a temporary resident – the tax authorities assume that up to 12 months abroad could be just a temporary absence. If you do not return after 12 months, your exit is automatically considered definitive. However, attention: if you did not communicate or declare your exit, the tax authorities assume you remained a resident during the initial 12 months, meaning you should have declared your income during that period. Only after the 13th month of absence would you become a non-resident, subject to exclusive withholding tax. In practice, those who do not file the exit declaration end up remaining “tied” to resident obligations for longer, risking double taxation and fines if they do not declare properly. You would still have to declare both Brazilian and foreign income to the Brazilian tax authorities as a formal resident.
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Practical Consequences: Opting for the definitive exit relieves you from future reporting obligations but requires diligence in following the formal steps at the right time. Maintaining tax residency avoids the immediate exit process but forces you to continue reporting annually to Brazil (including foreign income) and potentially deal with double taxation (Brazil and the country of residence). Those who remain tax residents in Brazil must declare all foreign and Brazilian income and are subject to regular annual adjustment rules, which could lead to taxes owed here on foreign income, if no agreement exists to avoid double taxation. On the other hand, by exiting definitively, you simplify your tax life in Brazil but must organize to pay withholding taxes on any remaining Brazilian income (such as rental income, for example).
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Communication vs. Definitive Exit Declaration: It’s important not to confuse the two documents. The Communication of Definitive Exit is submitted online (on the tax authority’s website) and can be sent from the date of departure until the last day of February in the following year. There is no penalty for delay, but it is highly recommended to submit it as soon as possible, especially if you have paying sources in Brazil – this allows them to change the tax regime on your income to non-resident immediately. The Definitive Exit Declaration is filed through the tax program (the same platform used for the annual declaration) between March and the last business day of April in the year following departure. It is mandatory if you left the country permanently and is subject to a fine if not submitted on time. In this declaration, you must report all income earned in the year of departure up until the date you left Brazil, as well as the assets you had at the time of departure. You must also appoint a representative in Brazil (with CPF and address in Brazil) to act on your behalf with the tax authorities if needed – this is required because after your departure, you will no longer be in the country to address any pending issues.
In summary, formally filing for definitive exit is the recommended path for those truly planning to live abroad without the intention of returning soon, as it properly concludes your resident obligations and prevents future issues. Remaining as a resident should only occur if there is an expectation of a brief return (within 12 months) or in specific cases. Otherwise, you may end up in a “gray area,” being required to file in both Brazil and abroad, with the risk of paying taxes twice or falling into trouble for omitting foreign income.
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The Importance of Specialized Accounting in International Taxation
As we have seen, the tax situation of an entrepreneur residing abroad can become much more complex than that of someone who remains in Brazil. There are various decisions (such as whether or not to make a final departure), parallel obligations (declaring worldwide income, complying with non-resident rules, maintaining the company’s compliance), and risks of double taxation or penalties for non-compliance. Relying on specialized accounting in international taxation is crucial to navigate this scenario safely.
An experienced accounting firm in this area can analyze the entrepreneur’s specific case, considering the destination country, the types of income involved, the company structure in Brazil, and other factors, to guide the best tax strategy. For example, specialized professionals will know how to leverage tax treaties to avoid double taxation when available, or mechanisms to offset taxes paid abroad; they will help prepare the Final Departure Declaration correctly, minimizing the chances of errors; and they will continue to monitor the company’s annual obligations and any income remaining in Brazil (such as rental income or investments), ensuring that everything is collected and reported according to the law.
Additionally, good international accounting can assist with practical issues, such as opening accounts abroad with legal transfers of funds from Brazil, guidance on declaring Brazilian assets abroad (DCBE – required by the Central Bank for individuals holding assets overseas above a certain value), and even estate planning or trusts for assets in multiple countries. In other words, it goes far beyond just filing income tax – it’s a consultative job aimed at optimizing the client’s total tax burden and avoiding legal pitfalls.
For medium and large businesses, the stakes are significant. A mistake or omission – for example, forgetting to declare a foreign income source while still a resident in Brazil or failing to pay tax on an income from Brazil after leaving – can result in hefty fines, CPF/CNPJ blockage, complications for the company, and other hassles. On the other hand, proper planning can generate savings and peace of mind. For instance, sometimes maintaining dual tax residency for a period may be beneficial, or conversely, ending Brazilian residency quickly to avoid taxing foreign earnings here – decisions that should only be made with proper calculations and knowledge of the laws.
Therefore, investing in specialized accounting advice is not a cost but rather a protection and optimization for your assets. This advisory will act as a partner, ensuring that you remain 100% compliant with Brazilian tax regulations while abroad and take advantage of all available legal benefits. With professionals guiding you, you can avoid the headache of trying to understand the tax rules of two countries on your own and focus on growing your business and adapting to your new country, with the certainty that your fiscal “homework” is being done correctly.
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