How a US Person Is Taxed on Brazilian Rental Income

How does the IRS tax a US person on Brazilian rental income?

A US person is taxed by the IRS on worldwide rental income, including Brazilian rentals. Brazil withholds 15% under Lei nº 9.779/1999, art. 7º — 25% for landlords domiciled in a Receita Federal-listed low-tax jurisdiction. There is no US-Brazil income-tax treaty; Form 1116 is the primary US relief.

The starting point — no US-Brazil tax treaty

The single most consequential fact: there is no comprehensive income-tax treaty in force between the United States and Brazil as of 2026. The IRS publishes its treaty index and Brazil does not appear on it.

Operational consequences:

• No reduced withholding. The Brazilian domestic non-resident rate applies in full. There is no treaty-based 5% or 10% override.
• No tie-breaker. Dual-residence cases are resolved under each country’s domestic rules, not a treaty residence article.
• Unilateral relief only. Both countries provide some unilateral foreign-tax-credit relief — Brazil under its own rules, the United States under IRC §901. There is no mutual-agreement procedure to fall back on.

The US-Brazil totalization agreement on Social Security signed in 2018 does not change income-tax treatment.

Brazilian withholding when the landlord is a non-resident

When the landlord is not a Brazilian tax resident — the typical case for a US-resident owner of a Brazilian property — Brazilian rental income is taxed at source under Lei 9.779/1999, art. 7º.

• Standard rate: 15% withholding on gross rent.
• 25% rate: applies when the non-resident landlord is domiciled in a jurisdiction classified as low-tax under IN RFB 1.037/2010 (most recently amended by IN RFB nº 2.265/2025, which notably removed the UAE from the low-tax list).

The withholding agent is whoever pays the rent that becomes income to the non-resident — usually the Brazilian property manager (administradora de imóveis) or, where there is no manager, the tenant. The withheld amount is settled monthly via DARF.

A common error: the Receita Federal DARF code for non-resident rental withholding is not the same as the resident carnê-leão code. The non-resident rental withholding code is DARF 9478 (IRRF — rendimentos pagos a residente no exterior).

When the US person is also a Brazilian tax resident — IRPF + carnê-leão

A US person who spends 183 days in any rolling 12-month window in Brazil generally becomes a Brazilian tax resident under Instrução Normativa RFB nº 208/2002. At that point the 15%/25% non-resident regime no longer applies; rental income is reported in the Brazilian individual income tax (IRPF) return on a worldwide basis.

Two practical consequences:

1. Carnê-leão. When the tenant is an individual (not a company that withholds), the resident landlord pays monthly tax under the carnê-leão regime via DARF code 0190. The tax is computed on a progressive table topping out at 27.5%.
2. Annual reconciliation on DAA-IRPF. The monthly carnê-leão payments are credited on the annual Declaração de Ajuste Anual; Brazilian-source rental gets fully integrated into ordinary income.

The US person who flips status mid-year files a partial-year IRPF for the resident period and the non-resident withholding regime for the non-resident period. They are not stacked.

Foreign Tax Credit on Form 1116

On the US side, Brazilian rental income is foreign-source under IRC §861(a)(4) — the situs of the underlying real property governs.

The mechanics:

• Schedule E (Form 1040) reports rental income and expenses on a per-property basis. US tax is computed on net rental income after depreciation under IRC §168.
• Form 1116 claims a credit for the Brazilian tax paid. Brazilian rental withholding falls in the passive-category basket.
• §904 limitation. FTC limitation = (foreign-source taxable income ÷ total taxable income) × US tax. Where the Brazilian gross-basis withholding exceeds the US tax on the same net income, the excess carries forward 10 years and back 1 year.

The load-bearing observation: Brazil withholds on gross rent; the US taxes net rental income after depreciation. The taxpayer therefore frequently has Brazilian tax in excess of US tax on the same property, and the excess credit is the primary planning lever.

IRS Publication 514 walks through the credit calculation in detail.

FX repatriation under Lei 14.286/2021

Lei nº 14.286/2021 replaced the prior FX framework anchored in Lei 4.131/1962 and the BACEN circulars built on top of it. The implementing rules are in Resolução BCB nº 277/2022 (which governs FX market operations — distinct from Resolução BCB nº 278/2022 on inbound foreign direct investment and Resolução BCB nº 279/2022 on Brazilian capital abroad) and related normatives.

For ordinary rental-remittance flows what matters:

• No SISBACEN registration is required for ordinary cross-border rental remittances. The prior RDE-IED registration scheme is now reserved for foreign direct investment in Brazilian companies.
• Bank-channel obligation. Remittances continue to flow through an authorized FX dealer (typically a Brazilian bank). The bank verifies the legal-economic basis of the transfer and applies IOF-Câmbio at the rate in effect on the day of liquidation. As of 2026, the general outbound FX rate under Decreto nº 12.499/2025 is 3.50% for non-investment remittances — a significant increase from the prior 0.38%. Confirm the applicable rate for rental-income remittances with the FX dealer at time of liquidation, as the classification (investment return vs. general availability) determines the rate.
• Documentation. The bank typically requires the rental contract, the withholding-tax DARF receipts, and the property’s matrícula. Without those, the remittance is held.

Practical filing checklist

For a US person with Brazilian rental income but no other Brazilian tax footprint:

1. In Brazil: monthly withholding via the property manager (or the tenant, where there is no manager); DARF settlement; annual non-resident reporting if applicable.
2. In the US: Schedule E for the property; Form 1116 (passive category) for the Brazilian tax credit; FBAR (FinCEN 114) if any Brazilian bank account exceeds US$10,000 at any point in the year; Form 8938 (FATCA) if applicable thresholds are met.
3. At remittance: bank-channel FX with documentation; IOF-Câmbio collected at source.
4. Carryforward tracking: unused FTC tracked on Form 1116 schedule for the 10-year carryforward.

Practitioner observations

• The 15% vs 25% pivot is documentary, not just jurisdictional. Several Caribbean jurisdictions plus a handful of European ones sit on IN RFB 1.037, and the 25% rate triggers automatically when the property manager remits — regardless of any beneficial-owner argument. Where ownership is being structured for the first time, the holding entity’s domicile is the lever, decided before purchase.
• DARF code mismatch is the most common self-filer error. When a US-resident owner self-files in Brazil — because no Brazilian property manager is involved — the wrong DARF code is what we most often see go wrong. The non-resident rental retention code is 9478, not the resident carnê-leão code 0190.
• Form 1116 usually leaves excess FTC on the table. Because Brazil withholds on gross rent and the US taxes net rent after depreciation, the per-property calculation often produces Brazilian tax greater than the US tax on the same income. The planning value is in coordinating the FTC carryforward with other foreign-source income — not in trying to reduce the Brazilian withholding.

When to consult an attorney

Cross-border real-estate ownership combines Brazilian withholding rules, US Form 1116 mechanics, FATCA/FBAR reporting, and FX-channel compliance. We work with US-resident owners on entity structuring, IRPF compliance, and the FTC planning that follows.

To discuss a specific situation, contact us through the firm’s contact form.

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This article is for informational purposes only and does not constitute legal advice. Each situation has specific facts that should be analyzed by a qualified attorney. We are licensed in Brazil; cross-border structures are coordinated with US-licensed tax counsel.