Taxation on investments: individuals should analyze the effects of taxes on profitability

Calculation rates and dynamics should be considered when choosing the investment

The taxation method for each type of investment can severely affect the profitability of the investor, since the taxes may compromise the viability of certain operations.

The investment market has been attracting even more interested parties. A recent survey by the Securities and Exchange Commission (Comissão de Valores Mobiliários - “CVM”), in a previous analysis of the responses of 5 thousand people, showed that 40% of them started to invest in the last five years. A relevant portion of this people already has access to more complex investments, such as cryptocurrencies, derivatives and investments overseas.

Understanding what the requirements in this area are, the operational dynamics for the calculation and retention of taxes contributes to a strategic view on the tax and wealth planning of individuals.

Taxation on investments

The investment market offers a wide variety of options. The choice of the portfolio involves many factors, but it also involves the analysis of taxation. Some modalities, contribution rates and points of attention are listed in the following topics.

VARIABLE INCOME

The financial income classified as a variable income must be detailed by month in a specific table of the income tax return, being classified as: current, options, future and forward markets, in addition to the segregation of day trade operations and real estate funds.

An accounting advice makes the work of correctly calculating the results easier, as well as issuing payment slips, where necessary.

Taxation on investments in stock

• Ordinary operations

The 15% rate must be paid through a DARF by the last day of the month after the earnings are calculated. Dividends are exempt from taxation. In addition, when the total assets sale in the month are less than BRL 20 thousand, the positive results are exempt from taxes.

One point of attention is that losses recorded in one month can be offset in the following month. For example, if the investor has a loss of BRL 10,000 in one month, in the following months the loss may be deducted from the positive income (profits) earned at the determination of the taxes.

• Day trade

In these operations, the IR tax rate is 20%. There is no tax exemption range.

Real estate investment funds

The income tax on profits from the sale of property investment fund (FII) shares is 20%. Dividends are exempt from collection.

Taxation of ETFs on variable income

The Exchange Traded Funds (ETFs) are equity funds traded at the stock market. The profitability is linked to stock indexes.

The shares of the ETFs of variable income are taxed at 15% on the capital gain. This is determined by the difference between the sale price and the purchase price of the share. In this case, the investor must pay himself until the last business day of the following month.

Taxation in virtual currencies

Crypto transactions are subject to tax in the form of capital gains, with progressive rates ranging from 15% to 22.5% tax. Thus, when the set of crypto sale transactions performed in the month is less than BRL 35 thousand, any gains will be exempt from taxation.

See also: Cryptoactive: Taxation of virtual currencies for individuals in Brazil

FIXED INCOME

Investments in fixed income are defined by the predictability of earnings. An advantage of this method is that taxation on income is exclusively done at source, at preestablished rates:

• 22.5% in investments with up to six months period;

• 20% in investments with up to six months and one day up to twelve months period;

• 17,5% in investments with up to twelve months and one day up to twenty-four months period;

• 15% in investments twenty-four months period.

Some of the investments that fall into this category are: National Treasury Securities (Notas do Tesouro Nacional - “NTN”), Central Bank Bonus (Bônus do Banco Central - “BBC”), Agrarian Debt Securities (Títulos da Dívida Agrária - “TDA”), Bills of Exchange (Letras de Câmbio - “LC”), Bank Certificates of Deposit (Certificados de Depósito Bancário - “CDB”), Bank Deposit Receipts (Recibos de Depósito Bancário - “RDB”), debentures, among others.

In addition, some fixed income securities produce exempt income, such as: Real Estate Credit Bills LCI (Letras de Crédito Imobiliário - LCA), Agribusiness Credit Bills (Letras de Crédito do Agronegócio - “LCA”), Mortgage Bills (Letras Hipotecárias - “LH”), Real Estate Receivables Certificates Certificados de Recebíveis Imobiliários - “CRI”), Agricultural Deposit Certificates Certificados de Depósito Agropecuário - “CDA”), Agricultural Warrant (Warrant Agropecuário - “WA”), Agribusiness Receivables Certificates (Certificados de Direitos Creditórios do Agronegócio - “CDCA”) and Agribusiness Receivables Certificates (Certificados de Recebíveis do Agronegócio - “CRA”).

DPC: support for individuals’ taxes planning

Domingues e Pinho Contadores has a department specialized in individuals dedicated to assisting clients in providing their monthly information to the tax authorities and in making tax calculations on investments and capital gains.

This follow-up removes the risk of penalties due to non-compliance with the payment of taxes, ensuring the taxpayer's safety and peace of mind in complying with the tax authorities' requirements.