There are 3 key aspects related to taxation on foreign investments in Brazil that all investors always are concerned about.
1. Tax on Dividends. A common question from foreigners is whether Brazilian tax authorities tax dividend or profit distribution paid out to shareholders. Dividends or profit distributed by Brazilian companies to resident or non-resident beneficiaries (individuals or corporations) are exempt from taxes. Even if the investor is located in a country regarded as a tax heaven for Brazilian law.
2. Tax on Interest on Net Equity. Middle and large size companies pay interest on net equity (juros sobre capital próprio – JCP) to their shareholders subject to a 15% flat tax rate, or 25% if they are located in tax haven jurisdiction listed by Brazilian tax authorities. But this interest is a good choice, because it is deductible from the de corporate income tax (IRPJ) and from the social contribution on profits (CSLL), which, combined, can reach a rate of 34%.
3. Tax on Capital Gain. Regarding capital gains on investments in Brazil, foreign taxpayers are subject to withholding income taxes on capital gains at rates ranging from 15% to 22.5%, depending on the size of the investment (15% up to BRL 5 million: 17,5% between BRL 5 and 10 million; 20% between BRL 10 and 30 million; 22,5% over BRL 30 million), except for gains generated out of investments in certain securities holding tax exemptions from time such as Agribusiness Receivables Certificates (CRAs).