For Brazilian companies, hiring an expatriate (one who lives outside their home country) represents a great advantage in terms of diversity and exchange of experiences in a corporate environment. For international organizations with business in Brazil, the possibility to count on its staff acting globally ensures the direct application of head office’s expertise to the business development.
While companies should be attentive to local laws and expatriation policies, preventing from labor claims and fines for noncompliance with tax obligations, foreign workers should know their rights and duties in Brazilian territory.
Domingues and Pinho Contadores, who has wide experience in advising national and multinational companies on employment of foreign human resources, highlights some items that employers and expatriates should consider in this process. Check below some fundamental points:
1. Visa: What the new Migration Law says
According to Law 13,445/2017, the so-called Migration Law, which comes into force from November this year, only work visa or work permit holders may perform work activities in Brazil. While the Ministry of Foreign Affairs grants the visa, Immigration General-Coordination (Coordenação-Geral de Imigração - “CGIg”), a Ministry of Labor (Ministério do Trabalho - “MTB”) agency, is responsible for authorizing foreign labor.
The authorization to work does not apply to visas and temporary visa holders, who may not be hired by companies in Brazil.
Those who have obtained the right to residence in Brazil have the access right to the labor market as well as the right to use the public health services, education, and social security.
2. How is the expatriate labor contract?
In cases where the company is foreign and brings employees from its country to work in in Brazil’s branch, a question that may arise is whether the expatriate professional should be subject to Brazilian legislation or the place of origin.
When the expatriation has less than one year period (short-term assignment), as a rule, the professional remains legally bound to the company that hired him to work overseas. Thus, the employee is subject to the legislation from where his employment contract was signed.
For expatriates has a period greater than one year (long-term assignment), it is necessary to mention that there are differences between the rules of private international law and the Brazilian jurisprudence. However, the most commonly accepted is that the law where the employment contract is exercised governs foreign workers. One point in favor of this trend is the isonomy principle under Brazilian legislation aspect, which does not allow different remuneration to a single worker.
3. Expatriate worker rights
In Brazil, the labor laws support the expatriate employee. In this way, the FGTS, PIS/PASEP and social security payment, in addition to other rights common to Brazilian workers, such as vacations, 13th salary, among others, are guaranteed.
4. Income tax, carnê-leão, and double taxation
As there are the above-mentioned rights, there are also a number of obligations involving expatriates. The income the taxes residents receive from Brazilian companies in Brazil is taxed at source and received net of tax by the beneficiaries, according to rates established by the Federal Revenue of Brazil.
The tax resident is required to file the Annual Adjustment Statement, a document that should be prepared from information provided by companies, paying sources.
It is worth remembering that if the expatriate has income overseas, there will also be responsibility to pay income tax payment slip (“carnê-leão”), a tax monthly payable, calculated from income received based on progressive table and rules for currency translation. In order to avoid double taxation, there are international treaties benefiting citizens from countries signing these agreements.
The tax residents and expatriates’ tax obligations in Brazil do not end in these items. For this reason, it is recommended that they count on a specialized advice that assures them the compliance with all the local rules. As this process is somewhat complex, foreigners increasingly turn to expatriate consultancy services. DPC, betting on this market growth, started to provide services individuals who seek guidance on rights and duties for immigrant, expatriate, and foreigner residents in Brazil.
5. Definitive Departure from Brazil: essential measures
When deciding to leave Brazil, the individual surely wants to stop being taxed here. For this to happen, the individual should file the Definitive Departure from Brazil Communication to Federal Revenue, an online form available at Federal Revenue of Brazil website. You still need to deliver the Definitive Departure Statement, replacing the Annual Adjustment Statement, until the last business day of April of the calendar year following the final departure or characterization of non-resident status. By this statement means, the last tax calculations will be made in Brazil, so that the foreign taxpayer should have no liabilities with the Brazilian tax authorities.
Global Mobility, Global Solutions
Ideally, both the company and the expatriate should be advised in the hiring process for work and fulfillment with tax obligations. There is no room for exceptions and non-compliance with legislation. While this may expose the business to unnecessary risks, the expatriate who submits to work without complying with Brazilian scenario demands may have to bear the consequences. In times of global mobility, citizens and companies should pay attention to all local obligations where they intend to operate and provide their services.
Domingues e Pinho Contadores provides labor and taxes advice to companies and expatriates in fulfilling their obligations by previously analyzing the applicability of international agreements to each case, in order to avoid double taxation and penalties.
Domingues e Pinho Contadores has specialized team ready to assist your company.
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