Brazil: New tax rates for capital gains

Brazil: New tax rates for capital gains

There is a change to the rates of taxation of capital gains realized by individual taxpayers in Brazil. Previously, the rate of tax was 15%. Under the new rules, capital gains are subject to taxation at progressive rates based on the amount realized.

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Law 13,259 of 2016 was published in the official gazette on 17 March 2016, and converts or transposes into law, Provisional Measure 692/2016 (Medida Provisória 692/2016 or MP 692). In Brazil, a Provisional Measure is an “act” issued by the president, with the authority of law until later approved by Congress. The Provisional Measure is effective as from its date of publication for a 60-day period, and it may be extended for an additional 60-day period (for a total of 120 days) on a request from Congress. 

Capital gains tax rates

Law 13,259 includes changes to the original language of MP 629 and establishes that capital gains will be subject to income tax based on the following rates:

  • 15% on an amount not exceeding R $5 million (or approximately US $1.38 million)
  • 17.5% on an amount that is at least R $5 million but less than R $10 million
  • 20% on an amount that is at least R $10 million but less than R $30 million
  • 22.5% on an amount that is at least R $30 million or more

KPMG observation

Law 13,259 makes explicit reference to the taxation of capital gains of individuals, but according to the rules of Brazilian tax law, the same capital gain tax treatment would apply to non-resident investors (that is, both individuals and legal entities). 

Also, Law 13,259 provides that the new progressive rates apply with an effective date beginning in January 2016. However, under Brazil’s federal constitution, changes introduced by Provisional Measures only are effective for the fiscal year following the year when the Provisional Measure is converted into law. Because MP 692 was converted into law in March 2016 (and not in 2015), it is uncertain whether the new rates of capital gains tax apply from January 2016 or from January 2017.

 

Read a March 2016 report (Portuguese) [PDF 55 KB] prepared by the KPMG member firm in Brazil: Tributação no Ganho de Capital 

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