Story: Beatriz Expands Her Business
After one year, Beatriz & Co. Consulting is growing. Beatriz decides to rent a small office downtown to meet clients. She also hires her first assistant, Ana.
Beatriz is proud—but Mr. Silva reminds her:
“Beatriz, new responsibilities mean new taxes. Now you will face municipal property tax, payroll taxes, and maybe even financial transaction tax if you take a loan.”
Property Tax – IPTU
When Beatriz signs the rental contract, she notices a clause: “Tenant is responsible for IPTU.”
She asks: “What is IPTU?”
Mr. Silva explains:
IPTU – Imposto Predial e Territorial Urbano – is the Urban Property Tax.
It is charged once a year by the municipality on property owners.
In many rental contracts, the tenant must pay it.
Beatriz checks her bill: the IPTU for her office is R$2,400 per year. She can pay in 10 monthly installments of R$240.
Payroll Taxes – INSS and FGTS
When Ana starts working, Beatriz must pay her salary—but also social contributions.
INSS (Instituto Nacional do Seguro Social): Beatriz must contribute a percentage of Ana’s salary to social security. This helps fund pensions, maternity leave, and sick leave.
FGTS (Fundo de Garantia do Tempo de Serviço): Beatriz deposits 8% of Ana’s salary each month into a special fund. If Ana loses her job, she can withdraw this money.
Ana’s salary is R$3,000. Each month, Beatriz must calculate:
INSS (around 20% from the company side) → R$600
FGTS (8%) → R$240
Beatriz is surprised: “Hiring is more expensive than I thought!”
Mr. Silva smiles: “Yes, but it protects employees and ensures compliance.”
Credit and Debt – IOF
A few months later, Beatriz considers taking a bank loan to buy new computers. The bank explains the loan conditions, and Beatriz notices another tax: IOF.
Mr. Silva explains:
IOF (Imposto sobre Operações Financeiras) is the Tax on Financial Transactions.
It applies to credit, loans, insurance, and currency exchange.
The rate changes depending on the operation. For example, loans usually have a daily rate (around 0.0082% per day, plus an additional 0.38% on the total).
Beatriz does a quick calculation:
If she borrows R$50,000, she will pay R$190 immediately (0.38%) plus the daily tax on the loan until it is paid.
“This tax is small compared to interest,” she says.
“True,” Mr. Silva answers, “but you must always include it in your financial planning.”
Authentic Element: Bank Loan Agreement
Beatriz reads a line from the loan contract:
“The borrower is responsible for IOF (Imposto sobre Operações Financeiras), which will be collected at the time of disbursement, plus any daily charges until the loan is paid.”
Beatriz underlines “collected at the time of disbursement”. She asks:
“Does this mean I pay the IOF immediately?”
“Exactly,” says Mr. Silva. “The bank withholds the tax and sends it to the government.”
Glossary (Plain English → Portuguese + Acronym)
IPTU – Urban Property Tax (Imposto Predial e Territorial Urbano)
INSS – National Social Security Institute (Instituto Nacional do Seguro Social)
FGTS – Severance Indemnity Fund (Fundo de Garantia do Tempo de Serviço)
IOF – Financial Transactions Tax (Imposto sobre Operações Financeiras)
Withholding tax – Tax kept by the payer before giving payment to the provider (e.g., payroll or foreign services)
Discussion
Why do you think Brazil taxes both property and financial transactions?
What difficulties do you see for small companies in managing payroll taxes?
