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Gift and donation taxation rates vary among the 26 states of Brazil, ranging from 4% in Rio de Janeiro to up to 7% in Santa Catarina. Beneficiaries of these gifts are responsible for declaring and paying this tax in their annual returns by April 30.
Some states will exempt gifts up to a certain amount from the tax — the specific amount also varies by state. Check the tax code of your recipient’s state if you want to calculate the exact amount that will be owed before transferring money.
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Brazilians are among the biggest tax evaders worldwide, largely due to an absence of penalties until recently. If you fail to file taxes on a large money transfer today, you could face a penalty equal to 20% of the tax in question. If you’re caught in one of the country’s irregular sweeps for unpaid taxes, that penalty increases to a stiff 75% of the amount you owe.
You could also be hit with jail time of six months to two years, with increased fines for subsequent evading.
Encourage your family and loved ones to include any large remittance on their annual tax return or speak to a tax professional for guidance.
Usually, yes — though it depends on the size and purpose of the transfer. If you’re sending more than $15,000 as a gift or more than $10,000 for business purposes, or if you’re transferring money to a foreign account in your name that’s held $10,000 or more at any point in the last year, you’ll have to let the IRS know.
By law, banks are required to report cash transactions that exceed $10,000 and transactions of any amount they find suspicious. For independent money transfer businesses, the threshold can be as low as $1,000. Which means that if you don’t file your taxes correctly, it’s very likely that the IRS will know.
Sending a lot of money out of the country? Know what the IRS expects of you.
There’s no legal cap on the amount of money you can send to Brazil, but some transfer providers will impose their own limits. If you’re planning a large transfer, use a secure provider like Xe that has no limits.
When sending money to your friends and family in Brazil, you’ll typically have the option of a bank-to-bank transfer, cash pickup or mobile wallet delivery.
To pick up the transfer in person, your recipient may need to show ID or a confirmation number. For other transfers — like to a Brazilian bank or money transfer company — they may not need to provide anything to receive it.
If you’re sending money to someone in Brazil, there’s a good chance they’ll need to pay taxes on it. On the bright side, the process is simple and they’ll be able to just include it with their yearly tax paperwork.
As with all international money transfers, be wary of potential fraud and only send money to people you know. Using a reputable provider can safeguard you from potential scams.
How do I handle the IRS when transferring large amounts?
If you follow the law and submit your legal documentation timely and accurately, you shouldn’t experience hassles with the IRS. If you choose not to follow the law, you may be on the hook for stiff penalties, including jail time.
How can I avoid IRS penalties if I fail to file?
If you can show the IRS reasonable cause for failing to file you might avoid penalties. Reasonable cause is decided on a case-by-case basis but events like house fires, serious illnesses and natural disasters have been approved in the past.
What’s the likelihood of getting caught if either my recipient or I don’t file the transfer on our taxes?
High. Both the US and Brazil keep tabs on money going into and out of their countries, and both banks and money transfer providers report transfers to governments.