Brazil

What taxes?

Capital gains tax
Inheritance, estate and gift taxes
Investment income
Local taxes
Real estate taxes
Social security taxes
Stock options
Wealth taxes
Other specific taxes

Capital gains tax
Since 2005, capital gain (taxed at 15%) on the sale of rights and goods of small value is not liable to income tax if their unit sales price within the month the sale occurs is equal to or lower than:

• R$20,000.00, in the case of sale of shares traded in the over-the-counter market;
• R$35,000.00, in the remaining cases.

Capital gains derived from the disposal of personal rights and goods (except in the cases presented above) are subject to income tax at a rate of 15%. The amount of taxable gain is the difference between the sale price and the acquisition price.

Inheritance, estate & gift taxes
A charge to Brazilian inheritance tax arises if an expatriate receives a Brazilian-source asset from an inheritance. The rate of tax is 4%.

Investment income
If the expatriate is a resident of Brazil, all investment income will be chargeable to tax in Brazil. If the expatriate is non-resident, only Brazilian sourced investment income will be taxed.

Local taxes
There are no local taxes in Brazil.

Real estate tax
There is no real estate tax in Brazil.

Social security taxes
Every individual’s total earnings from a Brazilian source are subject to local social security tax, which is withheld by the payer. Employee contributions, in 2007, ranged from 7.65% to 11% of monthly gross salary up to a prescribed maximum amount (currently R$334.28). For 2008, employers’ contributions were between 26.8% and 28.8% of monthly gross salary with no limitations on the amount of earnings.

Brazil has social security agreements with Argentina, Cape Verde, Chile, Greece, Italy, Luxembourg, Portugal, Spain, Uruguay and Paraguay.

Stock options
Stock option schemes and similar employee incentives are rarely, if ever, seen in Brazilian companies, and Brazilian tax laws are silent on their tax treatment. Depending on the structure developed, the stock option plan could be considered employment income (with its corresponding effects) or a capital gain (taxed at a rate of 15%).

Wealth tax
A net worth statement is part of an individual's income tax return, although no direct tax assessment is made based on this information.

Other specific taxes
Gains earned in the Brazilian fixed income market (ie. CD market, fixed investment fund market, etc.) and in the variable income market (ie. stock market, derivatives, etc.) are subject to withholding tax, which is withheld by the financial institution making the payment as follows: Long-term investment and fixed income, in general:

• 22.5% for investments up to 180 days;
• 20% for investments period between 181 and 360 days;
• 17.5% for investments period between 361 and 720 days;
• 15% for investments period over 720 days.

Short-term investment:

• 22.5% for investments up to 180 days;
• 20% for investments over 180 days.
• Stock Fund: 15%.
• Variable funds: 0.005%.
• Day Trade 1%

Exceptions may apply

Remittances abroad: 25% (Employment income with or without employment relationship, retirement pension due to death or disability, and rendering of services, which are paid, credited and remitted to non-resident) and 15% (other incomes in sources located in Brazil).

Other Income: 30% (prizes and raffles), 20% (prizes and raffles of goods and services), 1.5% (advertisement services) and 1.5% (payment of professional services).

Brazilian Central Bank Declaration

Please be informed that, in compliance with the rules currently in force, the Brazilian Central Bank establishes individuals considered Brazilian residents, must present to the Brazilian Central Bank a list of assets and rights they held outside Brazil on the ending balance as of December 31, 2008 in an amount equivalent to or exceeding US$ 100,000.00 (or the corresponding amount in other currencies).

the following assets need to be reported:

• Deposits made abroad;
• Cash loans;
• Financing;
• Operating and financial leases;
• Direct investments;
• Portfolio investments ;
• Investments in financial derivatives; and
• Other investments, including real estates and other properties.

Asset holders whose assets amount on December 31, 2008 is less than $100,000 are exempt from this reporting requirement.

Information about Brazil:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities