Interpretative Ruling #3/2016 | KPMG | BR

Tax News: Interpretative Ruling

Interpretative Ruling #3/2016

Brazilian Revenue Services says that the new capital gain taxation should apply as of January/2017 onwards.


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Tax News: Interpretative Ruling

Law 13,259, recently issued, has definitively changed capital gain taxation applicable to individuals in Brazil which should now be based on progressive income tax rates that range from 15% up to 22,5% according to the size of the capital gain obtained (see Tax News sent on March 24th, 2016, on Capital Gain Taxation – New Progressive Income Tax Rates).

According to such Law, which derived from the conversion of Provisional Measure 692/2015 into law, the new progressive income tax rates should apply as of January/2016 onwards. However, according to the Federal Constitution, changes introduced by Provisional Measures should only be effective in the fiscal year following its conversion into law.

Since Provisional Measure 692 was only converted into Law 13,259 in March/2016 (and not in 2015, when it was first issued), there was a discussion whether the new capital gain taxation rules should apply as of January/2016 or as of January/2017 onwards.

On April 29th, 2016, the Brazilian Revenue Services (RFB) issued Interpretative Ruling #3 clarifying that the new progressive income tax rates definitively introduced by Law 13,259 on capital gain should indeed apply as of January/2017 onwards (and not as of January/2016).

The new progressive income tax rates should be relevant for Brazilian individuals and non-resident investors (both individuals and/or legal entities).

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