ReVar: Brazilian Revenue Service creates program for calculating income tax on equity investments

ReVar is the Federal Revenue Service's new auxiliary software for calculating income tax and generating payment forms pertaining to equity transactions

Through RFB Normative Ruling No. 2,164/2023, issued on October 27, the Federal Revenue Service of Brazil (RFB) created the Auxiliary Program for Calculating Individual Income Tax on Equity Transactions - ReVar.

The program aims to speed up the process of calculating equity gains and Individual Income Tax (IRPF) levied on such transactions. To accomplish this, the program retrieves investment-related information that depositary institutions provide to the Federal Revenue Service with the consent of investors themselves. In the Brazilian market, the central depositary service is provided by the B3 Stock Exchange.

The regulation applies to earnings from transactions carried out on stock, commodities, futures and similar exchanges in the country, and from off-exchange future settlement transactions, with the exception of fixed income assets.

The provisions also cover income earned by individuals with residence or domicile abroad, but do not apply to income subject to special tax arrangements (e.g.: withholding income tax).

What will change for investors?

Until recently, there was no dedicated auxiliary program for equity transactions, which made it difficult to monitor the purchase and sale of assets, as well as gains and losses. Now, with ReVar, investors will be able to authorize financial institutions to provide information pertaining to them directly to the RFB, in addition to enjoying a number of benefits.

The software will inform investors, in real time, of the amounts payable in the Federal Revenue Payment Form (DARF bill), based on information passed on by the depositary institutions. In addition, the application will also enable the Annual Income Tax Return (DIRPF) to be pre-filled automatically.

Access to ReVar

Starting January 2024, ReVar will be available on the Virtual Service Center - e-CAC Portal, with access made through authentication via a gov.br account with a silver or gold level assigned to it.

By granting a digital power of attorney, taxpayers will be able to authorize an individual or legal entity to access the portal on their behalf.

Paying income tax using ReVar

The Individual Income Tax (IRPF) calculated through ReVar must be paid by the last business day of the month following the transaction, starting from the date of the trading, by means of a DARF generated by the program.

The rule also stipulates that, during the first month in which taxes are determined using ReVar, taxpayers must inform the unit price of each asset owned and the previous losses accumulated in the day-trade and standard modalities.

If the tax due amounts to less than the minimum allowed for payment – equivalent to BRL 10 –, it will be added to the amounts payable in the following months until that sum is fully paid off.

What changes for depositary institutions?

Provision of information

Once the investor authorizes the provision of information, financial institutions will have to submit to the Federal Revenue Service the data on the transactions carried out with securities traded on spot or at futures exchanges, such as:

Stock;

Brazilian Depositary Receipts - BDR;

Depositary Receipt (Units);

Gold as a financial asset;

Subscription rights and receipts;

Units/shares of stock index funds traded on stock exchanges or organized over-the-counter markets (Exchange Traded Funds - ETF);

Units/shares of Real Estate Investment Funds - FII;

Units/shares of Stock Investment Funds - FIA;

Units/shares of Equity Investment Funds - FIP and Investment Funds in units/shares of Equity Investment Funds - FIF FIP;;

Units/shares of Startups Investment Funds - FIEE;

Units/shares of Infrastructure Investment Funds - FIP-IE and Investment Funds for Participation in Economic Production Intensive in Research, Development and Innovation - FIP-PD&I;

Agro-Industrial Chain Investment Fund - Fiagro; and

Derivatives.

The above information must be supplied within 10 days of the transactions or up to the first following business day, should the date fall on a non-business day for tax collection purposes.

Schedule for providing information

Pursuant to the regulation, central depositaries must be submit all data collectively to the Revenue Service, according to the following schedule:

Schedule	Information to be provided
From January to March 2024	Assets held in custody on 31/12/2023 and transactions carried out as of 01/01/2024 by investors covered by the initial version of the program, intended for operational testing and validation of rules.
Starting April 2024	Assets held in custody on 31/03/2024 and transactions carried out as of 01/04/2024 by investors who perform only spot transactions and do not perform loan transactions or trade gold as a financial asset.
Starting January 2025	Assets held in custody on 31/12/2024 and transactions carried out as of 01/01/2025 by investors who trade securities traded on the spot market or on futures exchange.

Fines and penalties

Any entity authorized by an investor that fails to supply the required information or do so past the legal deadline, with inaccuracies or omissions, will be subject to fines.

The provision of false information is also considered a tax offense, subjecting the offender to further penalties and eventual sanctions.

Support for individuals

DPC has a department dedicated to assisting individuals with their tax challenges and compliance. To rely on our support, reach out to us at: dpc@dpc.com.br.