Brazil clarifies effective date for increased capital gains tax rates

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July 2016

Overview

The Brazilian tax authorities (RFB) on April 29, 2016, issued Interpretative Declaratory Act 3/2016 (ADI 3/2016) clarifying that the new capital gains tax rates in Law No. 13,259/2016 (Law 13,259) will apply as of January 1, 2017.

Brazil on March 16, 2016, had converted Provisional Measure 692/2015 (PM 692) into Law 13,259.  The law increased the capital gains tax rates applicable to individuals and non-resident entities as follows: 

  • 15% on gains up to BRL 5 million; 
  • 17.5% on gains over BRL 5 million, up to BRL 10 million;
  • 20% on gains over BRL 10 million, up to BRL 30 million; and 
  • 22.5% on gains over BRL 30 million.

The law had provided that the changes would take effect January 1, 2016. However, some paragraphs addressing capital gains from transactions occurring before December 31, 2015, were removed from the final text, making it unclear whether the higher tax rates were in effect for 2016.  ADI 3/2016 eliminates the uncertainty.

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John A. Salerno

Latin American Tax Group, PwC US

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