On March 13, 2024, the Federal Revenue Service published Normative Instruction No. 2,180/2024, which regulates the provisions introduced by Law No. 14,754/2023 on the taxation of income earned from investments abroad by individual’s resident in Brazil.
This Normative Instruction replicates the rules set out in Law No. 14,754/2023, only providing greater detail and specifics on the subject. Among the provisions set out in this rule, we highlight some relevant points below:
- Law No. 14,754/2023 brought the possibility of updating the value of assets and rights abroad to market value on 12/31/2023. The Normative Instruction, in turn, regulated this update, clarifying that the option for this update must be made through the Declaration of Option for the Update of Assets and Rights Abroad (Abex), which must be submitted by May 31, 2024 – the same date established for payment of the Income Tax calculated, at the rate of 8%, on this update.
- Law No. 14.754/2023 established the Tax Transparency Regime, in which the taxpayer can choose to declare the assets, rights and obligations held by the controlled entity abroad as if they were held directly by the individual. The Federal Revenue Service, through Normative Instruction No. 2,180/2024, regulated this regime, stating that the option must be made in the Annual Adjustment Statement (DAA) to be filed by May 31, 2024, and once made, it is irreversible.
Still on this point, it is worth mentioning that Normative Instruction No. 2,180/2024 introduced the mathematical formula to be applied by taxpayers when allocating the acquisition cost to assets and rights held by controlled entities abroad.
- Normative Instruction No. 2,180/2024 considers foreign controlled entities to be “insurance policies” whose principal or proceeds are redeemable, jointly, or separately, by the insured or their beneficiaries, when the investor is allowed to define or influence the investment strategy.
This provision, however, is not supported by Law No. 14,754/2023, so the classification adopted by the IRS could be questioned.
- Normative Instruction No. 2,180/2024 provides that “Virtual Assets” which are the digital representation of another financial investment abroad, or whose nature or characteristics fall within this definition, will be considered as “financial investments” abroad, for the purposes of the tax treatment provided for in Law No. 14,754/2023.
- According to Normative Instruction No. 2,180/2024, the exchange rate variation of foreign currency deposits in a current account or debit or credit card abroad will not be subject to Personal Income Tax (IRPF), if these deposits are not remunerated.
As explained above, Normative Instruction No. 2,180/2024 consolidates and regulates the rules set out in Law No. 14,754/2023, setting out the procedural aspects for compliance with the provisions set out in that law, except for some specific aspects that seem to go beyond the legal dictates and are therefore questionable.
Our Tax and Estate Organization, Family and Succession teams are available to provide clarification and guidance on the subject.
Co-authored by Thais Ribeiro Bernardes Casado and Beatriz Rossi Proença.
