Tax News: MP 692 - Non-resident’s capital gain ta... | KPMG | BR

Tax News: MP 692 - Non-resident’s capital gain taxation

Tax News: MP 692 - Non-resident’s capital gain ta...

On September 22, 2015, it was published Provisional Measure 692 (“MP 692/15”) creating new progressive withholding income tax (“WHT”) rates on capital gains earned by individuals.

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Tax News: MP 692 - Non-resident’s capital gain taxation

On September 22, 2015, it was published Provisional Measure 692 (“MP 692/15”) creating new progressive withholding income tax (“WHT”) rates on capital gains earned by individuals.

Existing rules provide that capital gains are subject to a 15% WHT, but with the new provisions of MP 692, as from 2016, the following WHT rates should be applicable:

  • 15% WHT on the portion of gain which does not exceed BRL 1 million;
  • 20% WHT on the portion of gains which exceeds BRL 1 million and does not exceed BRL 5 million;
  • 25% WHT on the portion of gains which exceeds BRL 5M and does not exceed BRL 20 million; and
  • 30% WHT on the portion of gains exceeding BRL 20 million.

 

The issue though is that, for Brazilian tax purposes, the same capital gain’s rules applied to Brazilian individuals are also applicable to non-resident investors (either foreign legal entities or individuals).

Thus, everything indicates that, as from 2016, new progressive WHT rates above will also apply on the capital gain earned by non-residents.

Nonetheless, MP 692 does not change the taxation on the gains earned by non-resident investors in relation to their investments in the Brazilian financial and capital market (i.e. via Resolution 4,373/2014), which remain subject to the existing tax treatment.

Finally, MP 692 still needs to be approved by the Brazilian Congress and its wording may be subject to changes.

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