Brazil increases certain capital gains tax rates Tax Insights

Tax Insights
from International Tax Services
Brazil increases certain capital gains
tax rates
April 5, 2016
In brief
Brazil on March 16, 2016, converted Provisional Measure 692/2015 (PM 692) into Law No. 13,259/2016
(Law 13,259). The law amends the capital gains tax rates applicable to individuals and non-resident
entities.
For prior coverage of related changes, see PwC Tax Insight, “Brazil changes capital gains tax rates for
non-resident entities,” October 13, 2015.
In detail
PM 692, as proposed by the
Executive and published in
September 2015, changed the
capital gains tax rate applicable
to individuals and non-resident
entities that are not located in
tax havens. PM 692 proposed
changing the 15% capital gains
tax rate to the following sliding
scale:
 15% on gains up to BRL 1
million
 20% on the portion of gains
that exceed BRL 1 million, up
to BRL 5 million
 25% on the portion of gains
that exceed BRL 5 million,
up to BRL 20 million and
 30% on the portion of gains
in excess of BRL 20 million.
The Brazilian Congress modified
the proposed rates. Law 13,259
provides that the applicable tax
rates on capital gains will be as
follows:
 15% on gains up to BRL 5
million
 17.5% on gains from BRL 5
million to BRL 10 million
 20% on gains from BRL 10
million to BRL 30 million
and
 22.5% on gains over BRL 30
million.
Similar to PM 692, Law 13,259
does not specify how the new
rates would apply to capital
gains realized by entities that
reside in tax havens, which
currently are subject to a 25%
tax rate.
Law 13,259 provides that it will
take effect as of January 1, 2016.
However, some paragraphs that
addressed how the law would
treat capital gains arising from
transactions occurring before
December 31, 2015, were
removed from the final text that
was converted into law.
Therefore, it is unclear whether
the higher tax rates are in effect
for 2016.
The takeaway
Multinational companies that
own Brazilian entities should
consider how these changes
could affect their investments.
Taxpayers undertaking or
intending to undertake
reorganizations, sales, or
acquisitions of Brazilian
investments should consider
how these changes may affect
their transactions. Taxpayers
should also monitor challenges
related to Law 13,259’s
applicability to transactions
implemented in 2016.
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Tax Insights
Let’s talk
For a deeper discussion of how this might affect your business, please contact:
International Tax Services, United States
John A. Salerno, US LATAX Leader
+1 (646) 471-2394
[email protected]
Jose Leiman
+1 (305) 381-7616
[email protected]
Rafael Vianello
+1 (646) 471-9809
[email protected]
Maria Bel
+1 (646) 471-1268
[email protected]
Daniel Landaluce
+1 (646) 471-7762
[email protected]
Lucia Echenique Fossati
+1 (646) 471-6294
[email protected]
Camila Silva Jimenez
+1 (646) 471-8794
[email protected]
Estevan Leal
+1 (646) 335-4838
[email protected]
International Tax Services, Brazil
Durval Portela
+55 11 3674 2582
[email protected]
Alvaro Pereira
+ 55 11 3674 2954
[email protected]
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