4 changes in the taxation of investments abroad

Brazilians who use offshore or trusts In order to invest abroad, they need to start calculating and planning the scenario that is foreseen in the bill approved by the Chamber of Deputies and which will now be considered by the Federal Senate. According to tax experts, this is necessary because in the event of sanctions against PL, there will be little time to take advantage of investors who have decided to upgrade the value of their investment shares.

The discussion on the taxation of these investments, as well as exclusive funds, has been ongoing for several months. PL 4173 makes some adjustments to the executive branch’s initial proposal, which projected the measure would raise at least 7 billion reais starting in 2024.

Among the changes are the replacement of the progressive table with a flat rate of 15%, which will apply to overseas earnings without any deductions; and the ability to update the value of the investment fund in the amount of 8%

This lower rate is not mandatory for clients who wish to upgrade their investment fund in whole or in part. Lawmakers even debated a 6% rate, but it was still below the 10% originally proposed by the government, said Rusian Núñez, personal tax specialist at Machado Associados’ office.

Maria Carolina Sampaio, head of the tax department and partner of GVM Advogados, recalls that Brazil was one of the few countries in the world that periodically did not tax foreign assets held by residents. In addition to the fundraising effect, the changes, if approved, will bring the country more in line with what is practiced among permanent members of the OECD (Organization for Economic Co-operation and Development).

“If this change is not implemented now, then in the coming years. It makes no sense not to tax offshore when the whole world does it. Brazil had to reach this level, especially because it wants to be an effective member of the OECD,” he says.

The text will go to the Senate and, if there are no changes, it will go to the president for approval. After that, the Federal Tax Service will have to publish all the rules and regulations related to the new law.

Check out the main changes.

1. Single rate

The initial draft provided for the exemption of the income of individuals abroad up to 6,000 reais, taking into account the annual salary. This value will result in a progressive table that varies from 15% to 22.5%.

Now, a flat rate of 15% of incomewhich must be paid annually, in the income tax adjustment return.

“Incomes referred to in Art kaput will be subject to the occurrence of IRPF with an annual adjustment of 15% of the annual portion of income, in which case deductions from the basis of calculation do not apply,” the text of the PL reads.

For Núñez of Machado Associados, this change is bad for individuals who hold small assets abroad, but it simplifies the taxation of those investments.

2. Cut off for offshores and trusts

Profits of entities controlled abroad, e.g offshore d trusts they will also pay a flat rate of 15%. The account will take into account the results of the accounting balance of this vehicle, even if the amounts are not credited to the account (for example, it will not be necessary to sell a share to pay).

Currently, Art offshore They are taxed only when the results are distributed. If this does not happen, the shares are not taxed.

Vehicles with active income less than 60% of total income will be subject to these rules. The previous level was 80%. This means that an offshore company that has 60% of its operating income will not need to make an annual payment.

3. Tax on past income

The PL provides that the taxpayer can revalue the assets between the date of acquisition and 31 December 2023. In this case, they will pay at a rate of 8% of the increase.

This update, however, is optional. For tax experts, the use of the exemption must be evaluated on a case-by-case basis.

In the rule lines, a newly acquired asset will not need to be updated. Investors who own a large number of shares and do not intend to sell them in the short term (two to three years from now) can also opt out if they believe the tax payment would be too high.

“You need to look at the profile of the investor. If he is going to keep these assets for a long time, the upgrade may not be worth it. Legislation does not require the use of this benefit,” says GVM’s Sampaio.

Tax preparers also remember that a partial update can be made. In this case, it will be possible to use the incentive only to update the value of assets that will be sold in the short term.

4. Exchange rate change

PL provides that exchange rate changes are also subject to these payments. For Nunes, it’s a moot point that could spark debate in the future.

for her It is not clear if this will happen in all cases or only for those who transferred money from Brazil abroad make an investment. The tax expert believes that the situation of those who used resources obtained in Brazil to invest abroad is different from those who received profits abroad.

“It is unclear whether those who invested directly in hard currency will feel the exchange rate fluctuations. Those who sent money abroad have a different (situation) and those who have already received it abroad and invested it,” he says.

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