Published in 21/03/2021, CPF® Professional Magazine
Brazilians’ demand for investment diversification has increased a lot in recent years. The political and economic scenario, combined with technological advances that have facilitated access and reduced the costs of investing in other countries, have made this alternative viable for an increasing number of investors.
However, investing abroad requires precaution: besides issues such as risk, liquidity and profitability, inherent in any investment (both from the perspective of Brazil and the country in which you intend to invest), it is important to understand the impacts of these investments, in particular regarding the costs and legal obligations (tax, inheritance, etc.) that arise in both countries.
From a tax point of view, the legislation of each country and the international treaties to avoid double taxation (which may change local legislation) should be noted, as well as the existence of reciprocity of tax treatment between countries.
Tax obligations in Brazil
Individuals who are tax resident in Brazil must inform their assets, in Brazil and abroad, in their Annual Adjustment Statements.
If the total value of assets abroad is equal to or greater than 1 million US dollars, it must also be reported to the Central Bank, through the Declaration of Brazilian Capitals Abroad (CBE).
The income tax on income received abroad must be paid by the individual until the last business day of the month following the receipt abroad, even if the amount has not been remitted to Brazil.
Income abroad, as well as income in Brazil, must be informed in the Annual Tax Return.
Inheritance and donations received abroad may be subject to ITCMD, state tax on inheritances and donations (a controversial issue that awaits a decision by the STF).
Investments in real estate abroad
Rental income from properties abroad is taxed in Brazil by the progressive table (0 to 27.5%).
The sale of properties abroad is subject to income tax, which varies between 15% and 22.5% on the capital gain. If the property was acquired with funds originally earned in reais, the gain must be calculated in reais. If it was acquired with funds earned abroad, the gain must be calculated in US dollars. If the acquisition took place with mixed resources, it must be calculated proportionally to the source.
Financial applications abroad
Unlike dividends received in Brazil, which are exempt, dividends abroad are taxed according to the progressive table (0 to 27.5%).
Gains obtained from the redemption of financial investments, sale of shares, etc. are subject to income tax, which varies between 15% and 22.5%. The calculation of the gain must consider the origin of the resources, as explained above. It is not possible to offset losses and gains.
Interest received abroad is also taxed between 15% and 22.5% in Brazil.
Investments through structures abroad
Investment abroad can be made through structures, such as offshore companies. One of the main advantages of these investments is the postponement of the time to pay the tax, which is due only when profits are distributed to the investor.
Profit distributions are taxed by the progressive table (0 to 27.5%). The tax is levied on the amount distributed, which will be the net value of transactions carried out at the PIC. In other words, in practice, there is compensation for losses with profits, contrary to what happens in investments made directly by individuals.
However, in general, the costs for opening and maintaining these structures are higher than the costs of investments made directly by the individual.
Brazilian depositary receipts
BDRs are assets traded on the Brazilian stock exchange, backed by assets abroad, such as shares of foreign companies, for example. In general, the bureaucracy and costs of investing in BDRs are lower compared to acquiring these assets directly abroad.
Gains obtained by trading BDRs must be taxed according to the same rules applicable to other variable income operations in Brazil: that is, in short, an income tax of 15% is levied on the net gain (or 20% for day trade operations).
Dividends received are considered as income abroad, being taxed according to the progressive table (0 to 27.5%), as well as the gains obtained by the canceling of the BDRs, which are considered as capital gains abroad, being taxed between 15 and 22.5%.
This article seeks to present an overview of the taxation of investments abroad, without intending to exhaust the topic. Due to the extension, complexity and particularities of the subject, it is recommended to consult an expert.
