Brazil’s tax authority (Receita Federal do Brasil - RFB) issued guidance clarifying that new capital gain tax rates apply as of January 2017, and do not apply retroactively from January 2016.
Law 13,259 of 2016 was published in the official gazette in March 2016 and provides for revisions to the capital gain tax rates of individual taxpayers in Brazil. The new rates are based on progressive income tax rates, ranging from 15% up to 22.5% depending on the amount of capital gains realized. Read TaxNewsFlash-Americas
The capital gains tax rate changes were first provided by Provisional Measure 692, that was issued in 2015. 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.
At the time when Provisional Measure 692 was converted into law, it appeared that the new progressive income tax rates would apply as of January 2016. However, under the Constitution, changes introduced by Provisional Measures are only allowed to be effective for the tax year following the Provisional Measure’s conversion into law. Because Provisional Measure 692 was only converted into Law 13,259 in March 2016 (and not in 2015, when it was first issued), it was uncertain whether the new capital gain tax rules would apply as of January 2016 or as of January 2017.
The RFB clarified in an interpretative ruling that the new progressive income tax rates for capital gains, as enacted by Law 13,259, apply as of January 2017. These new progressive tax rates will be relevant for Brazilian individuals and non-resident investors (both individuals and/or legal entities).
Read a July 2016 report prepared by the KPMG member firm in Brazil
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