Tax Treatment of Exchange Variation with Hedging

Law 14,031, of Jul-28-2020 – (DOU de Jul-29-2020) – Resulting from conversion of Provisional Measure 930/2020, with amendments, it has, among other measures, about the applicable tax treatment on the exchange variation of the investment value performed by financial institutions and other institutions authorized to operate by the Central Bank of Brazil (Bacen) in a controlled company, affiliate, subsidiary, branch or agency domiciled abroad.

From the financial year 2021, the exchange variation of the portion with hedging of the value of the investment made by financial and other institutions authorized to operate by the Central Bank of Brazil in a controlled company, affiliate, subsidiary, branch or agency domiciled abroad, registered in accordance with the jurisdiction regime, shall be computed in determining the actual profit and on the calculation basis of the Social Contribution on Net Income (CSLL) of the investor legal entity domiciled in the country, in the proportion of:

a) 50% (fifty percent) in 2021; and

b) 100% (one hundred percent), from 2022.