Understanding the tax implications of moving abroad: What you need to know

Before the move: Assessing the tax impact

When considering moving to another country, the need arises to understand the tax implications of this decision. Predicting the tax impact before the move is not only possible, but highly recommended. This planning stage provides a clear view of the taxes that may be levied after the move, making it easier to identify economic alternatives and ensuring compliance with tax obligations in both Brazil and the destination country.

Key issues after the move

1. The concept of tax residence
Tax residence is distinct from physical residence and is determined by international laws and agreements. Even if you live in different countries, your tax residence is established on the basis of the legislation of each nation, with the support of international rules aimed at avoiding double taxation.

2. Choice of tax residence
Tax residence cannot be chosen, but depends on the criteria established by each country, the main one being the length of stay in the respective country.

3. “Double tax residence”
“Double tax residence” can lead to questioning by the tax authorities of both countries, and the tax rules are designed to avoid this. Even in a scenario where it is not possible to define only one tax residence (which is rare), the consequence will not be to tax income from one country only in this country; and income obtained in another country only in this other country. Maintaining this situation is misguided and risky.

4. Change of tax residence in Brazil
The permanent departure from Brazil is formalized through the Notice of Permanent Departure and the Declaration of Permanent Departure to the Brazilian Revenue Service.

5. Consequences of not filing a notice of permanent departure
If you do not file the Notice of Permanent Departure or the Declaration of Permanent Departure, the Brazilian Revenue Service may not be able to identify that you have permanently moved out of the country. This is why it is common for people who have been living abroad for years, but who have not reported to the IRS of this change and continue to file their income tax annually, to remain tax resident in Brazil.

Failure to do so can result in the taxation of income obtained abroad and in Brazil, subject to fines and interest.

6. Consequences of leaving Brazil for tax purposes
Once you have filed a notice of your permanent departure from Brazil, there may be changes in the taxation of Brazilian and foreign income, as well as restrictions on bank accounts and investments held in Brazil. This is why it is important to carry out this tax departure after prior planning, which can mitigate these impacts.

7. Regulating your tax situation
If you have already moved to another country (for a long or short time) and have not made a permanent tax withdrawal from Brazil, it is possible and advisable to regulate this situation, following a prior study of its risks and impacts, both for Brazil and for Portugal or any other country.

8. Returning to Brazil
If you return permanently, it is possible to change your tax residence back to Brazil.

By understanding these nuances, you can plan the move more safely and avoid unpleasant tax surprises in the future. At FFSA, we are here to guide you through every step of this process.