Brazil

Employment income

Taxable compensation includes everything that is either directly or indirectly connected with the work and/or assignment remuneration package, including salary, premiums, bonuses, allowances of any kind, tax reimbursements, club dues, and company-owned cars.

Equity compensation

The income tax on stock options is due by individual residents in Brazil on the positive spread between the grant price and the fair market value at the time of exercise as well as upon the sale of the shares, where the sale results in a capital gain. Further implications must be observed in case the costs are recharged to the Brazilian entity.

Business income

Income arising from work without an employment relationship, when paid by legal entities and cooperatives, is subject to income tax withheld at source based on the progressive table mentioned in the Taxes on personal income section.

Dividend income

Dividend income received from Brazilian companies, relating to profits derived from 1996 onwards, is tax exempt. Dividend income received from investments made abroad, however, is subject to monthly income tax payments.

Interest income

Interest income received from Brazilian investments is subject to income tax withholding at source. The tax rate ranges from 15% to 22.5%, depending on the term of the investment. Interest income received from investments made abroad is subject to tax calculations on a monthly basis.

Exempt income

Among other items, the following are exempt from any income tax:

• Meals, transportation, and special work uniforms or clothing supplied by the employer free of any charge or the difference between the amount charged and their market values.
• Per diem allowances to cover room and board for working outside the county in which the company or office is based or in which the work is normally performed.
• Labour indemnities, limited to the legal amounts, including indemnities for labour accidents.
• Contributions made by the employer to private social security programs in favour of the employee, provided certain requirements are met.
• Reimbursement of relocation costs when moving to a different county at the request of the employer, provided some requirements are met.
• Severance Indemnity Fund (Fundo de Garantia por tempo de Serviço or FGTS).