Does Brazil tax Disabled US military benefits

04/29/23 @freshbatchoflean.  Welcome!  There is some chance that Brazil will tax at least a portion of your disability income. 

Brazil considers the worldwide income of permanent residents to be subject to income tax.  Brazil and the United States do not have a tax treaty that excludes certain categories of income from taxation.  However, Brazil has a policy against double taxation, which it follows pretty consistently. 

If you move to Brazil, you should find  a Brazilian accountant that you feel comfortable with.  That person will probably review your US tax return, your planned transfers of funds to Brazil, and the income (if any) that you plan to earn in Brazil to be able to estimate your taxes in Brazil.  Everybody's case is different, and yours will be unique to you.  In most years, I find that my US refund (I have taxes withheld from my Social Security payment) covers about half of my Brazilian income tax.  The rest is more than offset by the lower cost of living here.  But as I said, each case is different.

Abthree has  nailed. 

You  will be taxed on your declared income in Brazil, however.  If the amount you derive your living expenses exceeds a certain monthly threshold, then you might end up paying some taxes.   You are not taxed in your US earned retirement income if it does not show up in a banking account here.

Theoretically, you could keep your money there in some tax deferred annuity with a low exit penalty, and with draw with your US debit card, yet you would be nickel and dime through  transaction and exchange fees.

The option to Keep your money where is at, and take in only what's essential might or not work, based upon these assumptions. They don't take your US earnings for as long as they are earning interest in the US.   

On the flip side, by a percentual basis, your returns on your basic Government Indexed rate in Brazil pays a lot more than what you might've otherwise earn in the US.  Just check our "Prime Rate Equivalent:" the Selic, and you will figure it out by yourself. 

So, following Abthree advice, get an accountant to wade through all of these . And run your numbers through some spreadsheet of yours to simulate your "Ben Franklin" plus and minuses of either any strategy.

@sprealestatebroker so just keep my money in a U.S. account and withdraw what's needed and use my U.S. debit card for purchases and I should be good?

04/30/23 @sprealestatebroker so just keep my money in a U.S. account and withdraw what's needed and use my U.S. debit card for purchases and I should be good?
-@freshbatchoflean

I have my entire income deposited in my US bank account, and make a monthly transfer from that to my Brazilian bank account to cover expenses in Brazil; I use the debit card and electronic bill pay from the Brazilian account for all local payments. I find that works well for me, and ensures that my US debit card isn't exposed here. Some expats seem content withdrawing from ATMs with their US debit cards as needed, but I've never seen the point to be constantly juggling relatively small amounts of cash. To each his/her/their own.

@abthree

Bom dia!  Same.  I have all my income deposited into my US bank account and do a once/month transfer (Using Wise) to my Brazilian account.. I use Pix and other online payments from my Brazilian bank for bills and cash at an ATM once in a while if needed. I also do not use my US Bank Debit cards here anymore since I have a local bank.  And I use my local credit card or PIX for online purchases within Brazil.  This helps keep things clear for me and avoids unnecessary foreign exchange fees. 

@MA22 are you taxed in Brazil or just the US?

@MA22 are you taxed in Brazil or just the US?
-@freshbatchoflean

Bom dia!  I don't know yet. This is still my first year here.  I don't have to declare or pay anything for 2022 since I only resided here for less than 183 days.  I meet with a tax guy in a couple of weeks to look over everything for the next tax year 2023. 

@sprealestatebroker so just keep my money in a U.S. account and withdraw what's needed and use my U.S. debit card for purchases and I should be good?
-@freshbatchoflean

For most part , yes, you can do that. 

Both countries provide for depository insurance ( FDIC in the US ).   American Banks are more exposed these days due to FED policies. 

And since you are a Veteran, chances are you get your direct deposits from the VET Administration, I assume they handle all of their benefits. 

As a Veteran, you will visit the US often just on the account of your VA Hospital visits as needed.  So you want some money stashed out there for you when Stateside. Given the state of affairs in the US nowadays, you will run through some serious money when dropping in for a visit. 

Your  Brazilian Tax waiver bracket might be a little more than about R$ 2100 bracket, which , at that point, it barely covers your monthly expenses.   So adjust your spending to those spartan limits and then adjust it as needed on an ongoing basis.  If you were servicemen, you understand Spartan better than most others.

Also, when they ask if you want the State Receipt on your retail purchases, which is credit in your CPF ID for rebate incentives,  avoid asking for it.  Stay incognito, so there's no chance of any clawbacks.  One never knows. There is a reason they never had Carlo Gambino doing serious time. He did not lead a lavish lifestyle.

If you live off the major Metropolitan Centers ( read Rio-Sao Paulo ) , that should do you well, as far as keeping a lid on  your spending budget.  Pleading Poverty will make you creative and stretch your Dollars in a long way.

Besides, with currency variations, not even the US Dollar is immune to lose its value. As an example, about less than amount ago, it crossed below R$ party, somewhere around R$ 4,89.   So plan for the worst case scenario.

Living on budget rent or expensive rent:   

It comes to trade offs.   If you need efficient health care, it's either the State of Sao Paulo ( Metro and Hinterlands ), or Southern States ( Rio Grande do Sul, Parana, Santa Catarina ). 

Even having a VNA Card, if you are a legal resident, there are things you can pick up free with a SUS Card ( Universal Free Health Care ), if you don't mind lines ( just don't pick up on their Portuguese speaking much ) and some rubber stamping.  So, the more affluent an area, Rural or Urban, the better health care delivery, private or public.

And forget about keeping up with the Joneses. it's ok to network,  and climb a few steps, but you are no longer in need to do this.  Enjoy your Consumerism Detox.   Give a couple years, you will surprise yourself of how better off you became. 

@MA22 are you taxed in Brazil or just the US?
-@freshbatchoflean

Brazil's Receita Federal taxes on income and consumption, regardless of origin. 

@MA22 Will you keep this forum posted on your situation? I am retiring in 3 years and headed to Rio Grande do Sul for my retirement spot. I am a 100% disabled Veteran.

Hey folks, I haven't decided yet to move to Brazil full time and get a retirement visa. Currently I just visit as a tourist under 180 days annually. However, as @Abthree points out, even tho US and Brazil don't have a tax treaty, Brazil tries to avoid double taxation. Therefore I would try to declare to Brazil an income source which IS taxed in the USA, so it would only get taxed in one place. I too get VA disability and wouldn't want to get it taxed at all.

On another topic addressed above, I have a US credit card that doesn't charge foreign transaction fees. I  never use cash in Brazil for any purchases and avoid ATM machines. Then I pay off my credit card from my US bank. However, we pay our HOA, utilities, cell phones and internet online from our brazilian bank account.

Therefore I would try to declare to Brazil an income source which IS taxed in the USA, so it would only get taxed in one place. I too get VA disability and wouldn't want to get it taxed at all.
   

    -@EricPau

Brazil does try to minimize double taxation, but I doubt that the money that you bring into Brazil (like the monthly transfer I make, for example) will be totally exempt from any taxation on this end.  I also am not at all sure that Brazil has differential treatment between disability and a regular retirement pension.

It sounds like you're close enough to a decision that it would be worthwhile to spend some serious face time, records in hand, with a trustworthy Brazilian accountant to analyze your specific situation and get some customized advice.

    Hey folks, I haven't decided yet to move to Brazil full time and get a retirement visa. Currently I just visit as a tourist under 180 days annually. However, as @Abthree points out, even tho US and Brazil don't have a tax treaty, Brazil tries to avoid double taxation. Therefore I would try to declare to Brazil an income source which IS taxed in the USA, so it would only get taxed in one place. I too get VA disability and wouldn't want to get it taxed at all.
On another topic addressed above, I have a US credit card that doesn't charge foreign transaction fees. I  never use cash in Brazil for any purchases and avoid ATM machines. Then I pay off my credit card from my US bank. However, we pay our HOA, utilities, cell phones and internet online from our brazilian bank account.
   

    -@EricPau

Ralph Nader went at bat a few years ago on these foreign exchange transaction fees and subsequent  credit card fees.  Some  credit card issuers went as far as to waive these fees. I recall MBNA was one of them.

Now, Credit Card payments are dicey. You have to be punctual or else you will be nailed on interest and fees. That and making wire transfers.

The only advantage on credit cards are they are better against fraud. 

For simplicity and keeping fees at bay, choose either a debit card, or a stored valued card.  When I first came, I had a stored value card from Boston Hackney ( this is how cabbies got paid on plastic payments for fares ) , managed by Bank of America. It worked for as long as it had funds. 

For simplicity and keeping fees at bay, choose either a debit card, or a stored valued card. 

-@sprealestatebroker

For folks with access to banks in the US, I just learnt yesterday that if you have an account with Schwab bank, you can get a visa debit / ATM card with a) no foreign transaction fee and b) all ATM and debit fees credited back for use anywhere in the world.  No need to search for exchanges any more.

I hear that this is common with online banks.  You may want to check that option in addition to a stored value card (which I don't know how to get).