Brazil's tax structure has been modified repeatedly in recent years, and traditional tax evasion has come under strong attack. A series of income tax reforms, during the 1960s and 1970s closed many loopholes and expanded the roster of taxpayers, mainly through wider use of withholding taxes.
The basic income tax rate on corporations and other legal entities in 2000 was 15%, with an added 10% if profits exceed a certain limit. Firms may effectively reduce income tax liability by investing part of the tax due in government-approved incentive projects or by purchasing quotas in funds that invest in such projects. Corporate income earned overseas is not taxed.
There is a personal income tax of either 15% or 25%. Numerous exclusions from ordinary taxable income include profits on sales of shares, profits from certain real estate sales, and interest on stocks and bonds up to certain limits. Foreigners transferring residence from abroad need not pay income tax on returns from their overseas holdings for the first five years of residence in Brazil.
A value-added tax is payable on sales and transfers of goods at varying rates in accordance with the nature of the production (generally 10% to 15%). All corporations are subject to a social contribution tax at rates ranging from 8% for corporations to 18% for financial institutions. Other taxes include a financial operations levy; taxes on the production and distribution of minerals, fuels, and electric power; a real estate transfer tax; and municipal service and urban real estate taxes. There is a social security tax of 2%, and from 10% to 20% of employee payroll.