In recent months, the topic Permanent departure from Brazil has returned to the center of discussion after a controversial statement by the federal government and the Internal Revenue Service indicating a greater effort to identify Brazilians who have left the country, but are still considered tax residents for not having formalized their departure. However, the information was later retracted by the Receita Federal itself, but not before spreading fear among Brazilians living abroad.
The repercussions came because thousands of Brazilians are in this situation: they live permanently in another country, have a job abroad, assets, family, but have not submitted the Final Exit Form (CSD) nor do they deliver the Definitive Exit Declaration (DSD) to the IRS. In practice, this keeps them as Brazilian tax residentsThis poses serious risks.
This article explains it clearly and in depth:
- what is the final exit
- the real risks of not formalizing your departure
- the advantages and disadvantages of leaving permanently
- in which situations no making the final exit can be strategic
Let's go step by step.
What is the Final Exit from Brazil?
Permanent departure is the process by which a Brazilian who takes up residence in another country officially declares to the Receita Federal that is no longer a tax resident in Brazil.
This requires two formal steps:
- Communication of Final Departure (CSD)
- Definitive Exit Declaration (DSD) - which replaces the annual declaration for that year
After that, the person is no longer taxed in Brazil on its worldwide incomeThis means that the company will only have to pay tax on income generated in the country (taxed at source).
Risks of NOT making the Final Exit
Here are the real risks, and they are all serious:
1. worldwide income taxation
If you live abroad but are still a Brazilian tax resident, EVERYTHING you earn abroad is taxable in Brazilincluding:
- salary from abroad
- foreign company profits
- investments
- foreign pensions
- outside rental income
- capital gains
Many people don't declare - and this can generate fines with a very high fine.
2. Severe fines for omitting to declare
The fine for not declaring can be up to:
- 20% to 75% of tax dueplus SELIC interest
- minimum fine of R$ 165.74 for late payment (for those who have no tax to pay)
But when income is omitted, the fine can be as high as 150%.
3. Problems with banks and brokers in Brazil
If you don't leave, you remain a tax resident.
This prevents it:
- convert accounts to "non-resident" (legal requirement)
- receive income with correct taxation
- close exchange as a non-resident
- open international accounts in full compliance
4. Future difficulties when returning to Brazil
If you come back and try:
- open account
- buy property
- bringing money from abroad
- justify assets
...if you have any outstanding issues, fines or omissions, everything gets complicated.
Sometimes the damage is greater than if you had made the right exit.
Advantages of making a permanent exit
Now for the benefits - and there are many.
1. You don't pay income tax on income abroad
Brazil starts taxing only income from Brazilian sources.
And taxation is at source, simple, with no need to declare it in the annual IR.
2. End of the obligation to submit an Annual Declaration
You don't have to do it anymore:
- income tax return
- justification of asset variation
- calculating assets abroad
Your obligation is only in the country where you live.
3. Avoids double taxation
If you don't formalize your departure, you may have to pay taxes on your income from abroad.
With the final exit:
- you avoid disqualification
- avoid paying tax twice
- organize your tax situation legally
4. Facilitates life abroad
With the final exit, the taxpayer has:
- clear tax documentation
- coherence between tax residence and migratory residence
- less risk of generating inconsistencies in immigration
- easier international banking operations
5. Helps with estate planning
Who it's for:
- investments
- company abroad
- real estate outside
- global passive income
...the final exit allows for legitimate international tax planning.
Disadvantages of leaving permanently (yes, there are cases where it's not worth it)
Making a permanent exit is not always the best choice.
There are scenarios where maintaining tax residency in Brazil can be strategic.
1. The person wants to come back soon
If the Brazilian goes:
- student
- temporary expatriate
- professional on short contract
- sabbatical traveler
...sometimes it's not worth formalizing your departure.
2. Maintaining Brazilian benefits
Some possible impacts:
- difficulties in maintaining a national health plan
- impact on FGTS and INSS (depending on the case)
- changes to bank accounts or investments
- loss of financial products exclusively for residents
3. Brazilian taxation may be more advantageous
There are countries where taxation is much higher than in Brazil (e.g. Nordic countries, Canada, France).
If the Brazilian remains eligible in Brazil, there may be a strategy for:
- reduce global tax
- maintain investments in Brazil with a tax advantage
- operate under a lighter tax regime in some cases
But that only makes sense when there is coordination with international legislation.
4. People who still have strong economic ties in Brazil
If the Brazilian:
- keep your company here
- has great local heritage
- has a relevant income in the country
...permanent withdrawal can lead to unwanted changes in the tax regime.
Conclusion: to make the final exit or not?
The final exit is almost always advantageous for whom:
- lives outside Brazil permanently
- has income abroad
- does not intend to return in the short term
- works or invests globally
- wants to avoid tax risks with the IRS
But she can not ideal for whom:
- is temporarily out
- maintains health plans and benefits
- has strong economic ties in Brazil
- live in countries with extremely high taxation
The important thing is don't ignore the issue.
Still have questions? Talk to the CR Accounting & Consulting team and get advice on your case.
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