New Tax Rules Applicable to Brazilian Residents Related to Income Received Abroad

On April 30, 2023, Provisional Measure No. 1.171/2023 (the “Provisional Measure”) was published in the Federal Official Gazette. In addition to expanding the exemptions range for the individual income tax (Imposto sobre a Renda de Pessoas Físicas – “IRPF”) up to R$2,640, the Provisional Measure modified the rules for taxation of income earned by Brazilian residents in financial investments, controlled entities and trusts held abroad.

Among the changes foreseen in the Provisional Measure, we highlight: (i) the creation of an anti-deferral rule for income earned by Brazilian residents through controlled entities abroad; (ii) the implementation of an option for taxpayers to update the value of their assets and rights abroad to the market value on December 31, 2022, with the capital gains taxed at a rate of 10%; and (iii) the creation of new rules for taxing the taxation of trusts.

The Provisional Measure establishes that the Brazilian resident shall calculate, separately from their other revenues, their income from investments abroad, as well as assets and trusts. As of January 1, 2023, this income will be subject to the IRPF levied on the Annual Adjustment Statement (Declaração de Ajuste Anual do Imposto sobre a Renda da Pessoa Física – “DIRPF”) at the following rates:

a) 0% on the annual portion of income that does not exceed R$6,000;

b) 15% on the annual portion of income that exceeds R$6,000 and does not exceed R$50,000; and

c) 22.5% on the annual portion of income that exceeds R$50,000.

For further information related to this Legal Update, please contact our Tax team.