Taxes and Reports of Individuals' Assets and Investments abroad

More and more Brazilians invest in assets or investments abroad, as a way to diversify their portfolio or as protection of assets against internal tax changes. In addition, in this scenario, there are many people in doubt about of how to correctly enter information in the Personal Income Tax Return - DIRPF.

In order to clarify some of these doubts, we prepared the following guidelines:

Statement of assets abroad

All assets existing in other countries must be informed at the DIRPF and, if the sum of these investments at market value, annually, on Dec-31, exceeds USD 100,000.00, also at the Statement of Goods and Rights Abroad (CBE) of the Central Bank of Brazil (Bacen).

We may highlight that the way to obtain the good may influence how the taxpayer register at the statement, as follows:

a) if the investment is made by means of a legal entity overseas, owning assets and rights, the investor states only his/her interest in the company. The company's capital, stated at the investor's DIRPF is composed of all added assets, that is, properties acquired, remittances, and others.

b) if the investor's individual directly acquired the equity (real estate, amounts in bank accounts and other assets abroad), the DIRPF must bring the individualized information of each of these assets.

In addition, the investor needs to previously identify whether the investments abroad are taxable or not in Brazil, notably due to the Double Taxation Agreements signed by Brazil and several other countries throughout the world (http://idg.receita.fazenda.gov.br/acesso-rapido/legislacao/acordos-internacionais/acordos-para-avo-a-dupla-tributacao/acordos-para-avo-a-dupla-tributacao). Such distinction may change the form to be filled in the program.

Bacen - CBE

As aforementioned, individuals and legal entities holding assets (interest in companies’ capital, fixed income securities, shares, deposits, real estate, and others) overseas amounting the total equal to or greater than the equivalent to USD 100,000.00 on the last day of each year are required to file CBE to the Central Bank.

The deadline to file this statement to be prepared considering Dec-31 as base date of the prior year is usually between February 15 and April 5 of each year (business days).

Find here more information about CBE here.

 

DIRPF

Interest in companies overseas reported in DIRPF

In DIRPF, the procedure to report the interest in a company overseas is similar to the statement of an interest in Brazil, but using a different country code.

The investor must record in the Individual’s Income Tax Return the total invested in the company, in national currency, at the exchange rate of the investment date and keep it unchanged in following years until company's capital does not increase or decrease.

If the investment was made through resources directly earned abroad, the translation of the amounts into Brazilian Reais should follow the rules established by the Federal Revenue (RFB).

Statement of bank accounts - investments overseas

The investor must state the bank balances as of December 31 at the Bacen exchange purchase rate at this date in the DIRPF. The exchange rate fluctuation of cash deposits in unpaid account, if positive, is not taxable. This gain must be stated in the "Rendimentos isentos e não tributáveis" (exempt income or the non-taxable income) form. If the fluctuation is negative, the adjustment of the amounts kept in the current account must be made only in the "Bens e Direitos" (Assets and rights) form.

Taxes on income earned abroad

Income earned abroad, as a rule, is subject to Income Tax (IR).

The IR is charged at rates established in its progressive table. In it, a percentage is levied on the income earned abroad and the tax must be monthly paid to the Brazilian tax authorities through the Carne Leão (compulsory payment).

Capital gains on investments abroad

Capital gain is the positive difference between the sale and the purchase value of an asset or identification of income from investments abroad.

In order to calculate the tax on Foreign Capital Gains (Ganho de Capital em Moeda Estrangeira - “GCME”), it is important to know the origin of the resource that made the investment: resource originally earned in Brazilian Reais (received in Brazil and then translated into foreign currency to send to other countries), originally in foreign currency, or in Brazilian Reais and in foreign currency. The taxable event is the sale with profit or credits of income from investments, regardless the repatriation of resources or not. Automatic reinvestments are also subject to taxation in Brazil as it considers the financial availability of income.

The GCME is usually fifteen percent (15%) on profits or income. It should be noted that some countries have tax agreements with Brazil, which allows the taxpayer to request discount from the amounts already paid overseas.