There are 3 key aspects related to taxation on foreign investments in Brazil that all investors always are concerned about. While the Tax Reform is not consolidated, it is important to be clear about some important aspects.
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).
