This content is from: Brazil

Brazil: Changes concerning the capital gains tax rates for non-residents

Michela ChinMark Conomy

Provisional measure 692/2015 (PM 692) was released by the executive branch of the Brazilian government on September 22 2015. Among other items, PM 692 amends the tax rates applicable to individuals and certain companies on the capital gain deriving from the sale of assets and rights of any nature.

In principle, non-resident companies are subject to the rules applicable for individuals when calculating their Brazilian capital gains tax liability under the current law. Therefore, although PM 692 is, in substance, addressed toward individuals in Brazil, the implications extend to non-resident companies.

Broadly, the previous rules provided that such capital gains should be subject to tax at the rate of 15%. Pursuant to PM 692, the rates should apply as follows:

  • 15% in relation to the portion of gains that do not surpass BRL 1 million ($260,000);
  • 20% in relation to the portion of gains that exceed BRL 1 million and do not surpass BRL 5 million;
  • 25% in relation to the portion of gains that exceed BRL 5 million and do not surpass BRL 20 million; and
  • 30% in relation to the portion of gains that surpass BRL 20 million.

In the event of alienation of a part of the same asset or right as from the second transaction/operation, the capital gain should be calculated with capital gains from previous transactions in order to determine the relevant tax, deducting the amount of tax paid on the previous transaction(s).

Furthermore, pursuant to PM 692, capital gains derived by a company, arising on the alienation of non-current assets or rights, should also be subject to the above rates – except for companies which apply the actual, presumed or arbitrary profit methods (being the key methods of calculating tax for Brazilian entities).

PM 692 enters into effect on the date of publication, however the rates outlined above for capital gains taxation would only take effect from January 1 2016.

Finally, there have already been several issues identified with the current text, such as how the rules should apply to non-residents located in 'tax havens' (subject to withholding tax at 25%), with further issues likely to be raised as the measure is analysed in greater detail.

Michela Chin ( and Mark Conomy (

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