Individual Income Tax (IRPF): new rules on taxation of foreign investments
The Federal Revenue Service has issued RFB Normative Instruction No. 2,180/2024, providing additional guidelines on the Individual Income Tax (IRPF) for this year’s filings. The regulation addresses the taxation of income and capital gains from assets held abroad by Brazilian residents, as well as the updating of values for assets and rights abroad.
Foreign income, including financial investments and dividends from offshore entities, will be taxed at a rate of 15%, without deductions, including income from virtual assets. However, exchange rate variations on non-interest-bearing deposits and foreign currency in cash up to USD 5,000 will not be taxed.
The regulation also establishes a fiscal transparency regime for offshore entities, allowing taxpayers to declare the assets and rights of these entities as their own, taxing only the gains and income obtained.
For foreign trusts, income and capital gains are taxed under the IRPF, and the assets and rights must be declared in the Annual Adjustment Declaration (DAA) by the owner, at their acquisition cost.
Additionally, the regulation offers Brazilian residents the option to update the value of their assets and rights abroad, subject to an 8% tax on the difference between the updated value and the original acquisition cost. This update can be applied to a variety of assets and must be formalized by May 31, 2024, through the Abex system in e-CAC, with full payment of the tax due. Certain assets and rights are excluded from this option, such as those acquired in 2023, undeclared in 2022, foreign currency in cash, jewelry, precious metals, and assets in Brazil.
Stay aware of the changes and deadlines!
Provisional Measure Revokes Payroll Taxation for 17 Economic Sectors
A new Provisional Measure, MP No. 1,208/2024, was published in an extra edition of the Official Gazette on February 28. This measure revokes parts of previous legislation that provided for the taxation of the payroll of 17 economic sectors. These sectors had been exempt from taxation due to their high job creation rates.
Since 2012, the payroll tax relief policy has allowed certain companies to opt out of paying the 20% employer contribution on their employees’ salaries. Instead, they could replace it with the Social Security Contribution on Gross Revenue (CPRB), with rates ranging from 1% to 4.5%, depending on the activity.
Although the MP has revoked the provisions that would have reinstated taxation starting in April, it is crucial for companies to continue monitoring the development of this issue. The Federal Government has sent a new bill to the National Congress to re-discuss the matter of payroll taxation.Want to stay informed about these and other important topics? Count on Pryor Global.
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