Adjustment to the rule on capital gain by companies domiciled overseas in Brazil

The Federal Official Gazette of August 29, 2017 brought the publication of Normative Instruction (NI) No. 1,732/2017 of the Federal Revenue of Brazil (RFB), which changes the NI No. 1455/2014 as a consequence of the changes in Article 21 of Law 8,981/1995, for application of Income Tax paid, credited, employed, delivered or remitted to companies domiciled overseas.

Rates

The application of IRRF rates is set out below, with no prejudice to the international agreements, treaties, and conventions signed by Brazil:

About Payment

The taxpayer should pay for IRRF until the last working day of the month following to the earnings report. The responsibility for withholding and collection should be:

a) of the acquirer, individual or company, resident or domiciled in Brazil; or

b) of the acquirer's attorney-in-fact, when the acquirer is resident or domiciled abroad.

Note: In the merger of shares involving securities held by foreign investors operations, incorporating company in Brazil shall be responsible for withholding and payment of income tax at source to which the caption deals with.

If the sale of the same property or right occurs in parts, from the second operation, since carried out until the end of the calendar year following the first operation, the capital gain should be added to the gains achieved in the previous operations, for progressive tax purposes, discounting the tax amount paid in previous transactions.

The legislation also provides that shares or partnership interests group of the same

Triggering events as of Dec-31-2016

The 15% rate should be applied to triggering events until Dec-31-2016 for influence of withholding tax on the capital gain purposes mentioned to in NI.

Repeals

The NI 1,732 revoked the SRF Normative Instruction 407/2004 and SRF Normative Instruction 12/1999.