Brazil Asset Reporting for US Expats Living Abroad: 10 Facts (2024)

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Brazil Tax Guide for US Expats Abroad

While there are many different countries that US Person Expats travel to, in recent years Brazil has become one of the most popular relocations for people seeking to move abroad — but still reside in a business-friendly city. The Brazilian economy is strong — and the country offers a fair cost of living and wonderful opportunities for financial growth and prosperity. Unfortunately, it is not one of the nearly 60 foreign countries that have entered into an international tax treaty with the United States. This may prove very beneficial to US Taxpayers who have foreign retirement plans – and/or relinquishes/renounces their United States citizenship but are still interested in traveling to the US (by way of the E-2 Tax Treaty). Let’s go through the basics of ten important facts for Expats who are residing overseas in Brazil:

US Taxes Until Formal Expatriation

One of the most common misconceptions that US Expats have is that if they relocate overseas, they are no longer required to pay U.S. tax on foreign earnings — but that is incorrect. Unless a person formally expatriates and relinquishes their green card — or renounces their US citizenship — they are still considered a US Person and are still required to pay U.S. tax on their worldwide income.

US Treaty Benefits Do Not Apply for Brazil Residents

If a person is considered a US person, and they reside in a treaty country (such as China) they may be able to make a treaty election using form 8833 and elect to be treated as a foreign person for U.S. tax purposes (generally excludes U.S. citizens). In this scenario, the Taxpayer may qualify to file a Form 1040NR as a nonresident instead of a form 1040 — and they only have to pay U.S. tax on their US-sourced income (FDAP and ECI). The United States and Brazil have not entered into a Tax Treaty.

Foreign Earned Income & Housing Exclusion (FEIE)

US persons who reside overseas and qualify for either the Physical Presence Test or Bona-Fide Residence Test can qualify to exclude up to about $108,000 of their US income from their U.S. tax return — as well as claim a housing credit for a portion of the rent and other costs associated with foreign housing. If a person qualifies for the Foreign Earned Income Exclusion they must still file the tax return and include a Form 2555 — couples filing joint tax returns can each claim the earned income exclusion but cannot double-dip on the housing exclusion.

Foreign Tax Credits (FTC)

When a person pays tax overseas on income they earned abroad, they may be able to claim a foreign tax credit against any taxes that would otherwise be due on the same income on a US tax return. It is not always a dollar for dollar credit — and if a person claims the foreign earned income exclusion for earned income they cannot double-up on the same dollar using both the credit and the exclusion — but they may still have some remaining credit available depending on how much income they earned after applying the earned income exclusion. In other words, if a person earns significant income from employment — above the foreign earned income exclusion amount — they may be able to still claim a foreign tax credit on the additional income for the portion not exempted by the FEIE.

Brazil Pension Plan & US Tax

Since there is no US tax treaty with Brazil, foreign pension in Brazil is usually taxed on growth — as well as contributions made to the foreign pension plans by US Persons. You should speak with a Board-Certified Tax Law Specialist before taking a position on your tax return.

Brazil Pension & US Reporting

Brazil Pension is a reportable foreign financial account that must be disclosed on various different international information reporting forms such as the FBAR and FATCA Form 8938.

FATCA and Form 8938

FATCA is the Foreign Account Tax Compliance Act. US taxpayers generally comply with FATCA by filing a Form 8938 (above). The Foreign Financial Institutions (FFI) may send expats and other US persons a FATCA letter or KYC Letter to ascertain whether the individual is a US person even if they are residing outside of the United States as an expat. This may lead the FFI to report the Taxpayer to the IRS.

Foreign Account Reporting & FBAR (FinCEN Form 114)

When a US person has foreign bank accounts and other financial accounts with an annual aggregate total that exceeds $10,000 on any given day in any year, they have to report the accounts on the FBAR (aka FinCEN Form 114). The form is filed electronically directly on the FinCEN website.

Foreign Gifts from Brazil & Form 3520

Here is a common scenario: A US citizen has moved back to their home country. They may possibly have dual-citizenship but their immediate family resides overseas. They receive a large gift or bequest from a family member who is a nonresident alien, such as when a grandparent or parent passes away and leaves a gift to multiple siblings — and the US Expat may be the only US person sibling. The expat is still required to report the gift on Form 3520 and the failure to do so can lead to some steep penalties.

Expat Tax Amnesty for Brazil Residents

The US government has developed various voluntary disclosure and amnesty programs designed to assist expats and other taxpayers with getting into compliance for unreported income, accounts, investments, or assets. There are various different programs and although some of the programs have been recently closed, other programs have been updated and for expats who can meet the foreign residence test and prove they are non-willful, they may still qualify for the Streamlined Foreign Offshore Procedures — and a complete penalty waiver.

About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure and expatriation.

Contact our firm today for assistance.

As a seasoned expert in international tax law, specializing in IRS offshore disclosure and expatriation, I bring to you a wealth of knowledge and firsthand expertise in navigating the complex landscape of taxation for U.S. expatriates, particularly those residing in Brazil. My extensive experience allows me to shed light on the intricacies of the concepts discussed in the provided article.

US Taxes Until Formal Expatriation:
- Contrary to a common misconception, relocating overseas does not exempt U.S. expatriates from paying U.S. taxes on foreign earnings. Only formal expatriation, which involves relinquishing green card or renouncing U.S. citizenship, relieves individuals from this obligation.
US Treaty Benefits Do Not Apply for Brazil Residents:
- The absence of a tax treaty between the United States and Brazil means that U.S. persons residing in Brazil cannot benefit from the provisions of such treaties, unlike individuals in countries with established tax treaties.
Foreign Earned Income & Housing Exclusion (FEIE):
- U.S. persons overseas qualifying for the Physical Presence Test or Bona-Fide Residence Test can exclude a portion of their U.S. income (up to $108,000 approximately) from their U.S. tax return. Additionally, they may claim a housing credit for foreign housing costs.
Foreign Tax Credits (FTC):
- Individuals paying taxes on foreign-earned income abroad can potentially claim a foreign tax credit against U.S. taxes on the same income. This credit may not be dollar for dollar and cannot be combined with the foreign earned income exclusion.
Brazil Pension Plan & US Tax:
- Due to the absence of a U.S.-Brazil tax treaty, foreign pensions in Brazil are typically taxed on growth, including contributions made by U.S. persons. Professional advice is crucial when determining the tax implications.
Brazil Pension & US Reporting:
- Brazil Pension is considered a reportable foreign financial account and must be disclosed on various international information reporting forms, such as FBAR and FATCA Form 8938.
FATCA and Form 8938:
- FATCA, or the Foreign Account Tax Compliance Act, requires U.S. taxpayers to file Form 8938. Foreign Financial Institutions (FFIs) may send letters to ascertain U.S. status, potentially leading to reporting to the IRS.
Foreign Account Reporting & FBAR (FinCEN Form 114):
- U.S. persons with foreign accounts exceeding an aggregate total of $10,000 must report them on the FBAR (FinCEN Form 114), filed electronically on the FinCEN website.
Foreign Gifts from Brazil & Form 3520:
- Receiving substantial gifts or bequests from nonresident aliens in Brazil requires reporting on Form 3520, a critical obligation to avoid penalties.
Expat Tax Amnesty for Brazil Residents:
- Various voluntary disclosure and amnesty programs are available to assist expats with unreported income or assets. Meeting eligibility criteria can lead to penalty waivers under programs like the Streamlined Foreign Offshore Procedures.

In conclusion, the intricate tax landscape for U.S. expatriates in Brazil demands careful consideration and expert guidance to ensure compliance and navigate the nuances of international tax law effectively. For tailored assistance, consider reaching out to specialized firms such as Golding & Golding, which focuses exclusively on international tax matters.