Any remittance involving currencies from different countries is carried out through a foreign exchange transaction, whether for international travel, donation, purchase of products or any other reason.
Exchange is an operation of changing a currency value to another different currency. In Brazil, the exchange market is ruled by the National Monetary Council and by the Central Bank of Brazil.
In general, the foreign exchange market follows the following points, disclosed in the Central Bank of Brazil Exchange Chart:
• Mandatory use of domestic currency in Brazilian operations.
• Requirement to identify the customer in each exchange operation.
• Requirement for purchase and sale operations of foreign currency exclusively in an institution authorized to operate in the foreign exchange market or in its contracted company.
• Mandatory formalization of foreign exchange operations in foreign exchange contracts only for those greater than USD 10,000.00.
• The foreign exchange contracts may be electronically signed through any means in order to prove the authorship and integrity of documents, if the parties accept them as valid, in accordance with the current legislation.
Corporate amounts to meet various expenses and services rendered are operations that must undergo a deep and detailed analysis, since the Central Bank of Brazil has specific operational frameworks for each international remittance.
The authorized agent carries out the exchange operation (bank, brokerage, securities distributor, exchange brokerage houses, etc.). Each agent has its own list of documents required for each operation, and will inform the necessary procedures, in addition to the Total Effective Value (VET), which considers the exchange rate, the Financial Transaction Tax (IOF) and any fees charged.
Unilateral remittances from individuals are those that do not wish to provide consideration for services or goods (eg., transfer of assets and maintenance of dependents). Such remittances are exempt from IRRF.
The Law 13315/2016 reduced the Individuals’ Income Tax (IRRF) rate on the remittance of amounts intended to cover personal expenses abroad of individuals resident in that country, in tourist travel, business, services, training, or official missions.
Up to Dec-31-2019, the IRRF rate is reduced to 6% (after, this goes back to 25%). on amounts paid, credited, delivered, employed or remitted to a resident or domiciled entity abroad to cover personal expenses abroad of individuals residing in the country, in tourist trips, business, service, training or official missions, up to the global limit of BRL 20,000.00, per month.
As operators and travel agencies are subject to the limit of BRL 10,000.00, per month, per passenger, obeying the Executive Branch regulations regarding limits, number of passengers and conditions for use of the reduction, according to the funded expense type.
a) The following are not subject to withholding tax on income:
• remittances intended abroad for educational, scientific or cultural purposes, including for the payment of school fees, registration fees at congresses, conclaves, seminars or alike, and proficiency examination fees; and
• remittances made by individuals resident in Brazil to cover medical and hospital expenses with health care abroad, from the sender or from his/her dependents.
b) Income from work, with or without employment relationship, retirement, pension and services rendered, paid, credited, delivered, employed or remitted to residents or domiciled abroad, are subject to income tax at the rate of 25%.
c) Labor income from sources abroad on behalf of tax residents in Brazil is subject to taxation here regardless the remittance of the values (income universality) by means of carnê-leão.
Dividends and profits distributed to shareholders or members of companies domiciled in Brazil, even when remitted abroad, are not taxed, except those arising profits generated prior to Jan-01-1996, which will be subject to taxation under the applicable rule at that period.
On the other hand, dividends and profits distributed to shareholders or members resident in Brazil, from companies with head offices abroad are taxed here regardless the remittance of the values (income universality) by means of carnê-leão.
The amounts in foreign currency registered with the Central Bank of Brazil as investments made by non-residents may be repatriated without the IRRF. However, amounts in foreign currency that proportionally exceed the original investment (generating capital gain) will be subject to a 15% rate.
Capital reductions in companies located abroad will be subject to taxation according to the origin of the income that provided the investment abroad. If the shareholder or partner earned income and remitted it abroad in Brazilian Reais, capital reductions will be subject to taxation as capital gain, calculated in Brazilian Reais, due to the exchange variation in the period.
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