What is IRRF?

IRRF (Imposto de Renda Retido na Fonte) is the income tax the company deducts directly from the employee's salary and remits to Receita Federal, Brazil's tax authority. Instead of the worker paying everything on the annual return, the tax is prepaid month by month, through payroll.

The calculation base is the gross salary minus the INSS deduction, the per-dependent allowance and court-ordered alimony, where applicable. The progressive table is applied to that base, with rates of 7.5%, 15%, 22.5% and 27.5% and a deductible amount per bracket — those in the exempt bracket have no withholding at all.

There is also an optional simplified deduction, which replaces the itemized deductions with a flat allowance when more favorable. The amount withheld over the year is reconciled with the annual return: depending on deductible expenses, the taxpayer gets a refund or pays the difference.