Brazil – Capital Gains Taxation Made More Progressive, Burdensome

Brazil – Capital Gains Taxation Made More Progressive

This GMS Flash Alert reports that Brazil’s government recently increased the capital gains tax bands and rates.

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Brazil’s government recently increased the capital gains tax bands and rates. 

WHY THIS MATTERS

The higher capital gains tax rates could increase the tax burden on individuals, depending on (i) the individual’s residency status in Brazil, (ii) whether he is subject to Brazilian tax law, and (iii) sales of his assets located in Brazil.  

Capital Gains Taxation

Background

Currently, individuals are subject to a 15-percent withholding tax on their capital gains.  

The Executive Act (Provisional Measure 692/2015) changing the capital gains taxation rules was published in the official gazette (Diário Oficial) on 22 September 20151.  It provides for new rates of tax for capital gains realized by individual taxpayers with respect to the disposition of assets and rights.  The new rates come into force on January 1, 2016.

New Rates/Thresholds

I - 15 percent on the portion of gains that does not exceed BRL 1,000,000.00 (one million reais);

II - 20 percent on the portion of gains that exceeds BRL 1,000,000.00 (one million reais) but does not exceed BRL 5,000,000.00 (five million reais);

III - 25 percent on the portion of gains that exceeds BRL 5,000,000.00 (five million reais) but does not exceed BRL 20,000,000.00 (twenty million reais); and

IV - 30 percent on the portion of gains that exceeds BRL 20,000,000.00 (twenty million reais).

KPMG NOTE

It is uncertain at this point whether these new rules apply to nonresidents upon the sale of their assets in Brazil.  However, for residents, there may be planning opportunities prior to January 1. 

In many companies’ international assignment policies, capital gains taxation is not covered under their tax reimbursement program.  Tax on capital gains is generally, therefore, the responsibility of the individual.  Nonetheless, in the preparation of Brazilian tax returns, capital gains need to be reported.  

FOOTNOTE

1  Medida Provisória Nº 692, Carregando… de 22 de Setembro de 2015.  Altera a Lei nº 8.981. Carregando... de 20 de janeiro de 1995, para dispor acerca da incidência de imposto sobre a renda na hipótese de ganho de capital em decorrência da alienação de bens e direitos de qualquer natureza, e a Medida Provisória nº 685. Carregando... de 21 de julho de 2015, que institui o Programa de Redução de Litígios Tributários.  Medida Provisória Nº 692 was published in the official gazette (Diário Oficial) on 22 September 2015.  

BRL 1 = USD 0.256  

BRL 1 = EUR 0.232  

BRL 1 = GBP 0.167  

CONTACTS

For additional information or assistance, please contact your usual KPMG GMS or People Services professional or the following professional with the KPMG International member firm in Brazil:

 

Patricia Quintas

Tel. +55 11 3940-5020

pquintas@kpmg.com.br

The information contained in this newsletter was submitted by the KPMG International member firm in Brazil.

© 2016 KPMG Tax Advisors-Assessores Tributrios Ltda., a Brazilian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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