Investing outside your country of residence is an important step in diversifying your assets, especially when we're talking about the United States, one of the strongest and most stable economies in the world. However, this movement requires attention to a fundamental aspect that is often overlooked: the international taxation in the USA.

When investing in American real estate, stocks or companies, foreign investors are subject to the country's tax rules, which are quite different from those in Brazil. Ignoring these obligations can result in heavy fines, legal problems and even future restrictions on operating in the US.

That's why understanding how international taxation works in the US is essential for maintaining tax compliance, avoiding risks and ensuring that the investment brings the expected returns. In this article, you'll find out why the ITIN is necessary, which taxes are levied on foreign investors, which forms are required and how good planning can make all the difference.

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The basis for any international taxation process in the US starts with one essential number: the ITINan acronym for Individual Taxpayer Identification Number. It works as a kind of "American CPF" for foreigners who need to fulfill tax obligations in the United States but are not eligible to obtain one. SSN (Social Security Number), for citizens and permanent residents only.

Who needs an ITIN?

Any foreign individual who:

  • Invest in the USAwhether in real estate, shares, funds or companies;

  • You need filing taxes with the US Internal Revenue Service (IRS);

  • Receive income subject to taxation in the USAsuch as rents, dividends or capital gains;

  • Wishes avoid major retentions in payments, using forms such as the W-8BEN;

  • You need proof tax residence or financial link in the USA.

If you are in any of these situations, you must provide the ITIN in order to comply with the international taxation in the USA.

Difference between ITIN, SSN and EIN

Number For whom? Purpose
ITIN Non-resident foreigners Tax return as an individual
SSN Citizens and permanent residents Tax, social security and work identification
EIN Companies, trusts and entities Tax return as a legal entity

It is common for investors to have both a EIN (for your company) as a ITIN (for their natural person), especially when they operate through holding companies or LLCs.

How to apply for an ITIN

The ITIN request is made through the W-7 formThe IRS will send you the required documentation. This process can be done in three ways:

  1. With the help of an IRS authorized agent (Certifying Acceptance Agent - CAA), which facilitates and speeds up the process;

  2. By international mailThis can be risky if you send original documents (such as passports) directly to the IRS;

  3. In person at an IRS unit (in specific cases and by prior appointment in the USA).

It is highly advisable to rely on a specialized accountant or consultant, as errors in the paperwork or filing can delay the process and prevent you from being in compliance with the international taxation in the USA.

When investing in the United States, it is essential to understand how the American tax structure works, which differs greatly from the Brazilian one. The first step in the logic of international taxation in the US is to understand how the IRS classifies foreign investors for tax purposes.

Nonresident Alien" and "Resident Alien" concepts

THE IRS (Internal Revenue Service) divides foreign taxpayers into two categories:

  • Nonresident Alien: is an investor who does not legally reside in the US and does not meet the substantial presence criteria. This is the standard classification for most Brazilians who invest remotely.

  • Resident Alien: is who resides in the USA and meets certain criteria for residence (such as the Substantial Presence Test or legal residence through a visa).

This classification defines which types of income you must declare and how it will be taxed.

What income is taxable?

In international taxation in the USAforeigners are subject to tax on american source incomea. Among the main taxable incomes are:

  • Property rentals located in the USA

  • Dividends of American companies

  • Interest on certain investments

  • Capital gain the sale of assets (such as shares or real estate)

  • Profit distributions of LLCs or partnerships (depending on the corporate structure)

How this income is taxed depends on the type of structure adopted (individual or legal entity) and the tax category assigned by the IRS.

Taxes and deductions applicable to foreigners

In general, income paid to foreigners is subject to withholding tax:

  • 30% standard retention on dividends and some types of interest, unless there is a double taxation treaty (Brazil does not have this treaty with the US);

  • 15% to 30% on rentsdepending on how the investor chooses to tax it (effectively or via withholding);

  • Capital gain on the sale of real estate is normally subject to withholding tax. 15% to 20% on the value of the sale, according to the FIRPTA (Foreign Investment in Real Property Tax Act).

Foreigners who don't declare correctly may suffer higher retentions and be subject to future penalties.

Federal vs. state taxes

Unlike Brazil, the United States has two layers of taxes:

  • Federal tax: administered by the IRS, mandatory in all states.

  • State taxes: Each state defines its own rules. For example Florida does not charge state income taxThis can be advantageous for investors.

It is important to consider these variations in tax planning, as the choice of state where the investment is made can have a direct impact on net profitability.

When talking about international taxation in the USA, one issue that always raises questions is the possibility of being taxed twice on the same income: in the country where the investment is located (USA) and in the country of tax residence (such as Brazil). This is where double taxation treaties.

What they are and how they work

Double taxation treaties are agreements signed between countries to prevent the same income from being taxed twice. These treaties define:

  • Which country has priority in the taxation of certain types of income (rents, dividends, salaries, etc.);

  • Which country should offer the taxpayer a tax exemption or credit;

  • Procedures for exchanging tax information between the authorities of each country.

In practice, the treaty serves as a "manual" for resolving conflicts of tax jurisdiction.

Brazil and the US: absence of a treaty and its implications

Unfortunately, Brazil and the United States do not have a double taxation treaty in force. This means that, in theory, a Brazilian investor can:

  • Being taxed in the USA (for example, with 30% withholding on dividends);

  • And still be taxed in Brazil on same incomewhen declaring these amounts in the IRS.

This lack of agreement makes prior planning and the correct use of available legal forms and structures all the more important.

How to avoid double taxation in practice

Despite the lack of a treaty, there are some legal forms of minimize or even avoid double taxation:

  1. Credit for tax paid abroad: the IRS allows the tax paid in the USA to be deducted from the amount to be paid in Brazil, provided that the income has been duly declared and proof of withholding tax.

  2. Use of specific legal structures: depending on the nature of the investment, it may be more advantageous to use a company (LLC or C-Corp) in the US to centralize revenues and optimize the tax burden.

  3. Specialized advice: an accountant or tax lawyer with experience in international taxation in the USA can advise on the best way to reduce the tax impact and avoid double payment.

When making investments on American soil, many Brazilians believe that all they have to do is pay the withholding tax and that no other action is necessary. This is a common and potentially costly mistake. In the context of international taxation in the USA, it is essential to know when and how the foreigner must file an income tax return with the IRS (Internal Revenue Service).

Situations in which the foreigner must declare to the IRS

You, as non-resident foreignerYou must declare tax in the USA if:

  • Received income from American sourcesSuch as rents, dividends, interest or capital gains;

  • You have chosen to tax your income effectivelyinstead of being subject to full withholding tax (e.g. property rental);

  • He is a partner in an American company (LLC, C-Corp, etc.);

  • Wishes avoid automatic withholdings higher, presenting tax documentation to the payer;

  • You want claiming refunds or tax benefits (e.g. allowable deductions).

Ignoring these obligations could result in sanctions and make it impossible to operate in the US market in the future.

Deadlines and common forms

A American tax season usually follows this schedule:

  • Fiscal yearJanuary 1st to December 31st.

  • Deadline for sending the declaration: generally up to April 15th of the following year (with the possibility of an extension to October 15, if requested).

Main forms used in international taxation in the USA:

Form What it's for
1040-NR Tax return for non-resident aliens
W-8BEN Declaration of foreigners to reduce withholding tax
W-7 ITIN request
5472 Information on transactions between foreigners and companies in the USA (used by LLCs with a foreign partner)
Form 1120 or 1065 Tax returns of C-Corps or LLCs (depending on the structure)

Consequences of non-compliance

Failure to submit the declaration or submitting it incorrectly can lead to..:

  • Severe fines (some over US$ 25,000 depending on the form);

  • Withholding refunds;

  • Loss of tax benefits;

  • Inability to renew or regularize legal structure in the USA;

  • Risks to reputation and continuity of investment.

In practice, complying with the international taxation in the USA is just as important as choosing the right property or stock to invest in.

When it comes to investing in the United States, it's not enough to think about the financial return. It is essential to consider how the income will be taxed and how this affects your net profit. That's why international tax planning is an indispensable step for those seeking security, savings and sustainability in their investments, especially in the context of international taxation in the USA.

The importance of an adequate structure

The way you structure your investment directly influences the form of taxation and the level of asset protection. Here are some common possibilities:

  • Individuals: simpler, but often subject to a higher tax burden and less legal protection.

  • Company (LLC, C-Corp, etc.): allows for greater fiscal control, separation of assets and, in many cases, tax reductions through deductions.

  • Trust: used in succession strategies, asset protection and asset control in a more sophisticated way.

Each structure has advantages and disadvantages, and the ideal choice depends on the investor's profile, the type of asset and the long-term strategy.

Holding companies in the USA: when it makes sense

Create a holding company in the USA can be an excellent way to:

  • Centralize your investments (e.g. several properties or assets under the same entity);

  • Reducing succession risksand avoid the American inventory process (which can be expensive and time-consuming);

  • Simplifying accounting and tax returns;

  • In some cases, reduce the effective tax rateby distributing profits in a planned way.

This type of structure is especially recommended for those who own multiple assets, wish to scale their investments or plan to involve heirs in the future.

Example of efficient vs. inefficient planning

Efficient planning:
João invests in real estate in Florida through a LLC with effective tax election and hires an accountant to keep the books up to date. He has an active ITIN, submits the W-8BEN form to payers and declares the 1040-NR annually. As a result, you only pay on net rental income, avoid excessive withholdings and ensure legal certainty for transferring assets in the future.

Inefficient planning:
Carlos buys a house in his name, receives gross rents and has no ITIN. He suffers 30% withholding on the total amount of the rents, is unable to deduct expenses and does not file a tax return. Years later, he faces fines, difficulties in regularizing the situation and heirs have to deal with high inheritance costs in the American inventory.

This contrast shows how proper planning is an essential part of success on the international tax scene in the US.

Understanding the differences between the Brazilian and US tax systems is fundamental to avoiding surprises and putting together efficient tax planning. In the context of international taxation in the US, many Brazilian investors end up being penalized for trying to apply Brazilian logic to the American system, which almost never works.

World income concept

One of the main differences is how each country treats income earned abroad:

  • Brazil: adopts the global income taxation. This means that a Brazilian tax resident in the country must declaring and paying tax on any income, regardless of where it was generated (including in the US).

  • USA: also adopt the concept of world income, but applicable only to citizens and tax residents. Non-resident foreigners (like most Brazilian investors) are taxed only on US source income.

This difference is important because, even if you have already paid tax in the USA, you may still have to declare and supplement the tax in Brazilunless you use the foreign tax credit correctly.

Tax regimes: real profit, presumed profit and deductions

Brazil has different regimes for legal entities, real profit, presumed profit and Simples Nacional, that impact the tax burden. In the USA, the system is different:

  • Individuals and some LLCs can deduct operating expenses (with maintenance, interest, taxes, insurance, etc.), being taxed only on the net profit.

  • C-Corps and other corporate structures have specific rules, but they can also use various deductions to reduce their tax liability.

This flexibility allows better planning the fiscal impact of investments, something that does not exist, for example, in the rental of real estate by individuals in Brazil, where taxation is levied on gross revenue with few deductions allowed.

Inheritance and succession taxation

Another critical point in international taxation in the USA is the question of succession:

  • USA: apply inheritance tax (Estate Tax) which can reach up to 40% on goods located in the USA, even if the heir or the deceased were not resident. For foreigners, the exemption is very low (US$ 60 thousand), above that the tax can be applied.

  • Brazil: has no federal inheritance tax, only the ITCMD (state), with rates varying up to 8%.

In other words, a US$ 500,000 property in the USA can generate a very high tax bill in the inventory if there is no proper succession planning. Therefore, structures such as holdings, trusts or life insurance are widely recommended for international investors.

International taxation in the US involves a series of tax rules, forms, deadlines and classifications that are very different from those we know in Brazil. Many investors end up making mistakes when trying to deal with this process on their own, which can result in high fines, loss of tax benefits and even legal obstacles to continue investing in the country.

Risks of failure and penalties

Among the most common risks are:

  • Errors when filling in forms such as 1040-NR, W-8BEN or 5472, generating undue withholdings or fines;

  • Loss of ITIN due to lack of use or inadequate documentation;

  • Double tax payments due to a lack of knowledge of credit rules in Brazil;

  • Inheritance tax exposurewith the risk of taxation of up to 40% on goods in the USA;

  • Legal complications for heirs in the event of death without an adequate succession structure.

Benefits of having a specialized accountant/tax lawyer

Relying on a professional who understands both American and Brazilian legislation allows this:

  • Reduced tax burden with legal optimization strategies;

  • Compliance with all tax obligations on time and safely;

  • Effective succession planning;

  • Avoid excessive retention and fines for omission;

  • Legal and property peace of mind in the long term.

The Florida Lounge support

Knowing the complexity involved, the The Florida Lounge offers specialized advice for Brazilians investing in the USA, connecting you with the best accountants, tax lawyers and estate planners.

In addition, you receive:

  • Guidance on choosing the best legal structure to invest;

  • Support for ITIN request and organization of tax documents;

  • Continuous monitoring to ensure that everything complies with the IRS;

  • Integrated consultancy for real estate, business and inheritance.

More than just selling real estate, The Florida Lounge helps you invest safelyIt is also possible to make use of international tax rules in the USA and ensure that your assets grow in a structured way.

Cost-benefit: investment that avoids losses

Hiring this kind of support is not an expense, it's a insurance against major losses. The cost of advice is usually much less than a possible penalty for a tax error. It's the difference between investing with confidence or taking unnecessary risks.

Investing in the United States offers incredible opportunities to grow your wealth and generate income in dollars. But, as in any mature market, it requires fiscal responsibility and good planning. International taxation in the US may seem complex at first glance, but with the right structure and the right support, it stops being an obstacle and becomes a strategic advantage.

Throughout this article, we've shown you the importance of the ITIN, the tax rules applicable to foreigners, inheritance care, the differences between tax systems and, above all, how to avoid common mistakes that could jeopardize the return on your investment.

More than ever, information and expert advice are the pillars for investing safely and with peace of mind outside Brazil.

Want to invest safely? Talk to The Florida Lounge

O The Florida Lounge is ready to help you at every stage of your investment journey in the USA, from the purchase of the property to tax and inheritance structuring.

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Read also: The advantages of investing in real estate in Florida

Sources used and recommended:

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