Because freelancers are not our employees and we don't pay taxes on payouts, they must declare any income received through Mellow by themselves.
To carry on tax accounting in Brazil for your Mellow income, you need to:
be a tax resident
obtain a tax ID number
Tax residence in Brazil
Brazil taxes its residents on their worldwide income, while non-residents are taxed on Brazil-source earnings only. The source of income is determined based on the income payer's location, irrespective of where the work is performed.
The following individuals are considered residents for Brazilian income tax purposes:
Brazilian citizens living in Brazil.
Brazilian residents living abroad for the first 12 months subsequent to their departure (in cases where no "tax exit" return is filed).
Foreign national holders of permanent visas and holders of temporary work visas under an employment contract with a Brazilian entity, as of the date of entry to Brazil with such visas.
Foreign nationals holding temporary visas without an employment contract with a Brazilian entity, after completing 183 days of actual physical presence in Brazil (consecutive or not) within a 12-months period.
Individuals who enter Brazil under a temporary visa to work as a doctor under the Mais Médicos program, from the date of arrival.
Nationals from the Mercosur States (Argentina, Paraguay, and Uruguay), as well as from Bolivia, Chile, Colombia, and Peru, who claim temporary residence on the date the work relationship is established or on the date permanent residence is achieved.
Registering a CPF number (Cadastro de Pessoas Físicas – "Natural Persons Register") is mandatory for Brazilian and foreign nationals of any age. The CPF number is a unique identifier that's required for filing returns, paying taxes, opening bank accounts, receiving Mellow payments to a bank account, and more. You can register a CPF number for free via email or in person (more about CPF).
Individual microentrepreneurs carrying on professional activities must also register at the National Register of Legal Entities (Cadastro Nacional de Pessoas Jurídicas, CNPJ). The CNPJ number can be used, among other things, for receiving Mellow payments to a bank account (more about CNPJ), if CNPJ was registered for the individual entrepreneur not the company.
Freelancer in Brazil: Taxes and contributions
Tax liabilities in Brazil depend on the freelancer's status and/or fulfillment of certain conditions. See a detailed breakdown below.
The Carnê-leão income tax regime does not entail a special status or restrictions on types/sources of income, and does not require registration (except for obtaining an access code using the tax/digital number or through a bank). However, it only applies to income received from individuals or foreign companies (like Mellow). The tax liabilities are as follows:
Income tax (through Carnê-leão) is levied as a mandatory monthly payment, which has to be made by Brazil residents who receive income from other individuals or non-Brazilian sources (for example, income in Mellow). Income tax is paid on taxable income and is calculated in Brazilian real (BRL) at a progressive rate:
Income, BRL | Tax rate, % | Deductible tax amount, BRL |
up to 1,903.98 | Exempt | 0 |
1,903.99–2,826.65 | 7.5 | 142.80 |
2,826.66–3,751.05 | 15.0 | 354.80 |
3,751.06–4,664.68 | 22.5 | 636.13 |
from 4,664.68 | 27.5 | 869.36 |
The following expense items can be deducted from taxable income: tuition, alimony, dependents, pension contributions, social security contributions, and more (see here).
The Carnê-leão tax is calculated and paid before the last business day of the month following the month of income. To pay the tax, you need to go to your account and specify the following: source, date, size, and currency of income + purpose of the transaction (for example, description of the provided service or type of income). After you list all the transactions for the month, a table with payments for that month is generated in the account. If you look at the bottom of the table, you'll see the option to generate a payment document for paying the tax online.
Reporting: Residents file annual tax returns, which must be submitted before the last business day of April of the year following the tax period (calendar year), with no option to extend that deadline. The tax return can be submitted online. Spouses can file their returns either jointly or separately.
Penalties: Those who file their tax return past the deadline incur penalties (0.33% per one day of delay, starting from the first business day following the relevant date, but not more than 20%).
Social security contribution (Instituto Nacional do Seguro Social, INSS): These contributions are only payable for the formally employed (paid by the employer at the rates ranging from 7.5% to 14%; the maximum rate applies to incomes exceeding BRL 6,433.57 per month).
Simples Nacional is a tax regime for microentrepreneurs whose annual income equals BRL 4.8 million or less. Those opting for this regime must have a CNPJ number and lack the features listed in Article 17, Section II of Law LC 123/2006.
Simples Nacional combines the following taxes and contributions into a single monthly payment:
Corporate income tax (Imposto de Renda da Pessoa Jurídica, IRPJ)
Social contributions on net profits (Social sobre o Lucro Líquido, CSLL)
Employer’s social security contributions (Contribuição Previdenciária Patronal, CPP)
Social contributions paid by companies (Programa de Integração Social / Programa de Formação do Patrimônio do Servidor Público, PIS/PASEP) and contribution for social security financing (Contribuição para o Financiamento da Seguridade Social, COFINS), both levied on gross revenue
Tax on industrialized products (Imposto sobre Produtos Industrializados, IPI)
Tax on the circulation of foods and interstate transportation services, aka VAT (Imposto sobre Circulação de Mercadorias e Serviços, ICMS)
Tax on services (Imposto Sobre Serviços, ISS)
The above taxes are calculated based on the activity and income, ranging from 1.6% to 32% (for more information, see Simples Nacional calculation, tax calculator). Any tax that is not listed above does not constitute part of Simples Nacional and must be calculated and paid separately.
Reporting: The taxes are paid monthly on the basis of a tax collection document (Documento de Arrecadação do Simples Nacional, DAS), before the 20th day of the month following the month of income.
To issue your DAS for the month, go to the PGMEI website → Enter your CNPJ number and select Generate tax collection document (DAS) → Select the reporting year and month → Create a DAS and proceed to make or schedule a payment.
For the BRL 3.6 million to BRL 4.8 million bracket of accumulated gross revenue (Receita Bruta Acumulada, RBA), DAS does not include ISS and ICMS: if the excess is below 20% – ISS and ICMS are calculated separately starting from the next calendar year, if it is above 20% – from the next month. Here are some more details about ISS and ICMS:
Sales tax on services (ISS) is a monthly municipal tax levied at 2% to 5%, depending on the type of activity and the state of registration. Tax returns are filed to the municipality offices monthly, with the municipality also setting the filing deadlines and format. It may sometimes be enough to submit to the municipality the invoices for the year without subsequently filing a tax return.
Tax on the circulation of foods and interstate transportation services, or VAT (ICMS) is a federal tax levied at 17% to 20% depending on the type of product or service and the place of the freelancer's registration. Tax returns are filed online every month using an electronic document – EFD (Escrituração Fiscal Digital). Some Brazil states also require taxpayers to submit a monthly federal return (for example, GIA – Guia de Informação e Apuração).
To be an individual microentrepreneur (microempreendedor individual, MEI) in Brazil, you must register for a National Registry of Legal Entities number (CNPJ) and submit an application through the government portal, making sure you meet the following requirements:
Annual gross revenue of not more than BRL 81,000.00 (if MEI registration takes place in a month other than January, then the revenue cap is proportionally reduced based on the number of months in the year you've been registered as a MEI).
Cannot be a partner, administrator, or owner of another business.
Cannot have more than one employee.
The type of business must be listed in Annex XI to Resolution CGSN 140/2018.
The MEI is required to pay the following taxes on a monthly basis:
Social security contribution (INSS) – 5% of the minimum salary (as at 2023: service businesses – BRL 65.6; sales businesses – BRL 61.6; sales and service businesses – BRL 66.6).
Service tax (Imposto Sobre Serviços, ISS) – BRL 5 + INSS.
VAT on sales and services (Imposto sobre Circulação de Mercadorias e Serviços, ICMS) – BRL 1 + INSS.
MEIs are subject to the Simples Nacional regime, so they make a monthly tax payment online on the basis of the DAS (Documento de Arrecadação do Simples Nacional) collection document. That payment combines all of the above taxes, meaning there's no need to calculate and pay them separately, and it must be made until the 20th day of the month following the month of income. MEIs can also request to pay their debt in installments through Portal do Empreendor. The installments program features two options: regular (up to 60 payments) and special (up to 120 payments).
Reporting: The MEI must make an annual online filing of the DASN, short for Declaração Anual de Faturamento do Simples Nacional, which is a tax return that lists all their revenues for the year. The deadline for filing the DASN annual return is May 31 of the year following the reporting year. It must be filed even if the MEI had no revenues during the year.
The MEI also needs to prepare a report on gross revenue for the month, which is to be filed before the 20th day of the month following the reporting one (template). Attach to the report invoices for the purchase of goods and services, as well as issued invoices.
Invoicing: MEIs must issue invoices for sales and services to companies (this requires accreditation by the competent authorities of the city or state; the legislation varies for each city and state depending on the type of activity). Starting January 1, 2023, MEIs are able to issue services e-invoices (Nota Fiscal de Serviós Eletrônica, NFS-e) through the Simples Nacional portal or mobile app (all MEIs should have received the respective notification).
Penalties: Failure to make the monthly DAS payment entails a penalty of 0.33% of the debt amount for each day of delay, but not more than 20%. Interest is calculated based on the SELIC rate and amounts to 1% for the first month of delay. If the deadline is missed, a new DAS document should be generated for the month of the late payment that includes the interest and penalties.
IMPORTANT! Mellow does not have the option to choose a tax status for freelancers based in Brazil, but you can fill in your tax ID in your account.
Mellow: payments to Brazilian bank accounts
For payments to Brazilian bank accounts made through Mellow, a 0.38% tax on financial transactions (Impuesto a las Operaciones Financieras, IOF) is withheld. This is dictated by the country's legislation on the taxation of financial transactions. The bank with which the account is opened can be requested to issue a receipt called Comprovante de pagamento de IOF, which details the transaction and the IOF tax amount.
IOF is withheld by Mellow's payment partner for payments made to a Brazilian bank account based on the freelancer's tax data, which is why it's necessary to enter the CPF or CNPJ number when linking the bank account.
IMPORTANT! The name of the bank account's beneficiary must match the name in the Mellow account. Also, the CPF or CNPJ numbers must belong to the bank account holder and Mellow account owner.
Additional info
Income received via Mellow is declared based on certificates and invoices, and as per the offer agreement.
If you have any questions, get in touch via the chat in your Mellow account, or email [email protected].