The Federal Government has been seeking to implement several changes in the tax sphere in recent months.
In this regard, firstly, we highlight Provisional Measure No. 1,184/23, published on August 28th, which proposes changes in the taxation of exclusive funds in Brazil.
Currently, exclusive funds are subject to taxation only at the time of redemption or amortization of quotas. On the other hand, open-end funds are subject to semi-annual advance payment of withholding tax, with rates ranging from 15% to 20%, depending on the investment tenure.
Should the aforementioned Provisional Measure be enacted, the advance tax payed on exclusive funds will transpire under the same system applied to open-end funds, twice a year, on the last business day of May and November, starting from January 1st, 2024.
Regarding the rates applicable to redemption or amortization of quotas, the Provisional Measure stipulates that they will also follow those defined for the taxation of open-end funds. Therefore, long-term exclusive funds will be taxed at a rate of 15%, while short-term funds will be subject to a rate of 22.5% if redemptions/amortizations are made in less than 180 days, or 20% if the tenure of investment exceeds that period.
Simultaneously, it is also worth mentioning Bill No. 4,173/2023, proposed by the Federal Government, which aims to subject financial investments made abroad to a single table based on income brackets.
According to the text of the Bill of Law, individuals with an annual income of up to R$ 6,000 abroad will be subject to a 0% tax rate. Income ranging from R$ 6,000 to R$ 50,000 will be taxed at a rate of 15%, while income exceeding R$ 50,000 will be subject to a 22.5% tax rate.
Once enacted, the new rule will be applied to income earned by individuals abroad, including results generated by controlled entities, starting from January 1st, 2024. Accumulated income until December 31st, 2023, will be taxed according to the existing rule, only at the time of their availability to the taxpayer.
Lastly, the Bill also foresees a reduction in the tax rate for taxpayers who update their foreign assets and rights to market value on December 31st, 2023. In this case, the difference between the cost of assets and their market value will be subject to a final rate of 10%, and the tax must be paid by the taxpayer by May 2024.
Our tax team is available to provide clarifications and guidance on the subject addressed.
Co-authored by: Thais Ribeiro Bernardes Casado and Lara Braga Maciel.
