Dual Tax Residency When Leaving Brazil: How Treaties Decide

Dual tax residency happens when Brazil and the destination country both consider you a resident at the same time. If there is a double taxation convention between the two, the residence article resolves it with criteria in order: permanent home, center of vital interests, habitual abode and nationality. Without a convention, there is no such tie-breaker.

This text covers only that risk. The tax charged on departure is in Exit tax in Brazil: does it exist?, and the step-by-step guide with deadlines is in how to legally change your tax residence.

When does Brazil stop considering you a resident?

Normative Instruction SRF 208/2002 (Instrução Normativa SRF 208/2002) treats as a non-resident anyone who leaves the national territory permanently, on the date of departure (art. 3, II). There is an important caveat in art. 2, V: anyone who leaves without filing the Notice of Permanent Departure from Brazil remains a resident during the first 12 consecutive months of absence.

In practice, departure has three control points, according to the government's official page on the service:

1. •Notice of Permanent Departure from Brazil (CSDP, Comunicação de Saída Definitiva do País): valid from the day of departure until the last day of February of the following year.
2. •Final Tax Return on Permanent Departure (DSDP, Declaração de Saída Definitiva do País): filed in the year after departure, by the deadline for the annual income tax return. It is mandatory even if you did not file the CSDP.
3. •Tax assessed: paid under the terms of the return, in a single installment.

The rule speaks of departure "on a permanent basis". To support that if questioned, keep what shows the move was real: a housing contract in the new country, tickets, closing of ties in Brazil.

How does dual tax residency arise?

Each country defines in its own law who its residents are. Brazil looks at permanent departure. The destination country may look at housing, days of presence or another criterion, and these criteria do not talk to each other. If both think you are a resident, both may want to tax the same income.

Double taxation conventions start by defining resident. Art. 4, item 1, of the convention with Portugal says that a resident is anyone who, under the legislation of the State, is liable to tax by reason of domicile, residence, place of management or a similar criterion. The convention with the Netherlands uses equivalent wording.

This article does not detail the domestic laws of destination countries. For those, consult the country's tax authority and a local professional.

How do treaties break the tie on residence?

When an individual is a resident of both countries, art. 4, item 2, of the conventions with Portugal (Decree 4,012/2001) and with the Netherlands (Decree 355/1991) applies four criteria, in this order:

Two practical consequences come out of this text. Keeping a home available in Brazil while renting another abroad takes the tie-breaker to the center of vital interests, which is an analysis of facts and not a number of days. And a Brazilian with no home or defined center of interests, who habitually stays in both countries or in neither, is treated as a resident of Brazil, the country of which they are a national.

Each convention has its own text. Read art. 4 of the convention that applies to your case before deciding on the move.

Does Brazil have a convention with the country you are moving to?

The tie-breaker only applies if a convention is in force. Brazil's Federal Revenue Service (Receita Federal) keeps a page with the agreements to avoid double taxation. Among common destinations, the list includes Portugal, the United Arab Emirates, the Netherlands and Singapore. Paraguay, Panama and the United States do not appear on it. The same page states that the agreement with Germany has had no effect since January 1, 2006.

This means that, for anyone going to a country outside the list, there is no convention to break the tie. Residence depends only on each country's law, and the risk of being treated as a resident of both is higher. The list changes over time; check the page before deciding.

To understand the destinations, see our pages on Portugal and Dubai (United Arab Emirates).

What can you do to reduce the risk of residing in two countries?

Use this as a checklist with your accountant:

1. •Confirm whether a convention exists with the destination country and read its art. 4.
2. •File the CSDP on time, by the last day of February of the year after departure.
3. •File the DSDP by the annual return deadline and pay the tax assessed.
4. •Gather proof of housing and presence in the new country, and of the closing of ties in Brazil.
5. •Decide what to do with property and accounts in Brazil, knowing they weigh in the analysis of the center of vital interests.
6. •Ask a professional in the new country to confirm how it treats your residence.

Anyone with assets outside Brazil should also look at the structure of offshore for expats. To organize documentation and deadlines, see the compliance and tax planning services.

What if you return to Brazil?

According to the service's official page, you are considered a resident again on the date you arrive in the country, if you return with the intention of living here or if you stay in Brazil for more than 183 days, consecutive or not, within 12 months.

For that reason, visits to Brazil require date tracking. A calendar of entries and exits, with supporting documents, is the simplest proof that you stayed below the limit.