Brazil new Tax law for 2024 for resident and Citizens

@NewBrazil,

Thanks for the heads up. Sorry I am new here, and your comments confuse me. I know what taxes are but I like specifics.

Can you supply a link for analysis or would that be unallowed?

04/03/24@NewBrazil.  This is certainly something that merits attention, and I'll be discussing it with my accountant in detail when she and I get together to do my Brazilian taxes.  I'll report any feedback she provides, as general information, not as specific tax advice. 

These kinds of laws are usually aimed at very high income Brazilians who hide, or try to hide, a lot of money abroad.  Some expats might be caught in the crossfire so we have to stay informed, but between that and the policy of the RF to avoid double taxation, I'll be surprised if many people who already pay taxes on their investment income in their countries of origin see much change.  Anyone with a lot of tax-exempt income not covered by a tax treaty with Brazil may be in for an unpleasant surprise, and crypto is a definite wildcard.

As always, the best advice it to have an accountant that you trust, follow that person's advice if it makes sense to you, and if not, don't be shy about getting a second opinion.

@NewBrazil, thank you for letting us know.

Could you please send a link to the new tax law?

I am actually in favor of new rules that increase transparency.  If the US and Brazil can align on how income is reported worldwide, then it would be easier for US and Brazil to develop new tax treaties.

There are 2 certainties in life - death and taxes.... Trying to avoid those 2 is an exercise in futility.

Let me see if I understand this. According to the new Brazilian tax law, if you have all your accounts in the US, (earned through your work and retirement) you are supposed to pay 15 % of interest earned on all accounts in the US (401k, Roth, checking and savings...) to the Receita Federal?

“It's really cold today”

”How cold?”

”So cold l saw a politician with his hand in his OWN pocket”

@HawkeyeSwarm Here a website tha talk about the new law.

https://www.ey.com/en_gl/tax-alerts/bra … w%20law%20(Law%2014%2C754,closed%2Dend%20funds%20in%20Brazil.

Here is a link that explains the new law.

https://www.ey.com/en_gl/tax-alerts/bra … w%20law%20(Law%2014%2C754,closed%2Dend%20funds%20in%20Brazil.

here a site that talks about crypto and the tax

https://www.coindesk.com/policy/2023/11 … eport/amp/

@NewBrazil, is there a link to the actual Portuguese law?

I used to work for one of the Big 3 Consulting firms in the old days and EY is very good at selling and not telling you the whole picture....

EY tends to aim for big fish clients - not someone like me - planning for retirement.

One question though - if you pay the IRS its dues on April 15 without the 15% payment to Brazil and then pay Brazil its 15% on April 30 - will you get the 15% tax overpayment back next year as an IRS credit?  How about investment losses - how are those treated?

I am hoping that the actual Portuguese law would provide some clarification.

I'm starting to consult with CPAs in both countries who understand international tax laws. I agree with getting the news from the horse's mouth.

https://www.gov.br/fazenda/pt-br/assunt … eclaracoes

Read the portion labeled 'Rendimentos no exterior'. According to the Brazilian government site, it's 8%, instead of 15%

(Tanslation in English)

Income abroad

Another relevant change for Personal Income Tax in 2024, as announced by the Federal Revenue Service, is the new approach in relation to investments abroad.  This change results from the implementation of Law 14,754/2023, which covers a series of specificities regarding the taxation of investments and applications outside Brazil.

The legislation allows taxpayers the option of declaring the assets of entities controlled abroad as if they were in their direct possession, aiming for greater transparency and control over these assets.  Furthermore, there is now a clear requirement for detailed trusts to be detailed, with the aim of accurately individualizing and identifying these structures in tax returns.

Another point is the possibility of updating the value of assets and rights located outside the country, allowing the calculation and anticipation of capital gains with a fixed rate of 8%, which must be collected by May 31st.  This measure represents an opportunity for taxpayers to regularize their assets abroad, potentially reducing future tax complications.

Furthermore, the law extends periodic taxation to closed-end funds, aligning them with the rules already applied to open-ended funds, and establishes uniform taxation of these investments for the months of May and November (come-quotas).

04/05/24 @Roger Fonseca Santos.  Thanks for this, Roger.  I've sent the link to my accountant and asked her to start researching it. 

I always have my US taxes done first and then give everything, including my US tax return, to my Brazilian accountant to prepare the Brazilian return.  I finished sending my information to my US accountant yesterday, so while we're waiting, this is the perfect time for my Brazilian accountant to determine what changes, if any, we'll need to make this year for the RF.

@abthree

Abthree, would you mind to share your accountant information? I have spent a long time away from Brazil and will be returning in June this year.

04/05/24    @abthree
Abthree, would you mind to share your accountant information? I have spent a long time away from Brazil and will be returning in June this year.
   

    -@Roger Fonseca Santos

Gladly, with all my usual disclaimers that everyone's tax situation is different, and in describing my own I'm not offering advice on anyone else's. 😉

@abthree

Absolutely. I'm just assuming this accountant understands tax laws across-the-board - BR-USA.

In my ignorance this is a capital gains tax then and not a tax on say existing investments, 401k, crypto accounts without transactions? i have zero capitals gains so unless they want to tax my retirement accounts i should be fine.

04/07/24    In my ignorance this is a capital gains tax then and not a tax on say existing investments, 401k, crypto accounts without transactions? i have zero capitals gains so unless they want to tax my retirement accounts i should be fine.
   

    -@rnbtg

My first reading of the new law would indicate that

• Capital gains and dividends realized in investment (post-tax) accounts are taxable.  Since I'm already paying US taxes on these anyway, and my US tax return is part of the input in preparing my Brazilian return, I'm expecting little or no change in my Brazilian taxes;
• Reporting requirements for foreign accounts denominated in the currency of the country where they are held are being tightened, and many accounts for which reporting was not required previously will have mandatory reporting going forward.  This does not mean that the balances will be taxed, just that the RF will be tracking changes in value year over year, as it does for Brazilian assets now.  I'm expecting to be hit with the new reporting requirements, but not to see a tax effect, at least in the near term.

Two important questions for which I don't have an answer yet and need to obtain one are:

• How are capital gains and dividend income in retirement accounts (IRAs, 401ks, etc. in the US) going to be treated?  If they're treated as tax-deferred, that's fine.  If not, I'm going to have to reorganize mine somewhat, to focus even more completely on investment appreciation and eliminate paper "income" that isn't really usable income at all;
• How will the monthly calculation of exchange gains and losses on income and capital gains, which seems pretty elaborate, apply to investments that from their inception were in foreign currency (USD, in my case) and never in BRL, or will it apply at all? 

Very good reporting. All much appreciated.

Will

Hi Abthree, similar question from myside too can I ask for your accountant details as well I need to get affairs sorted out and need some advise if possible

Here is a direct copy from the Tax article

The Law defines financial investments broadly under the new taxation regime to include any financial operations outside the country, such as:

Interest-bearing bank deposits

Interest-bearing certificates of deposits

Virtual assets

Digital wallets or checking accounts with income

Shares of investment funds, except those treated as controlled entities abroad

Financial instruments

Insurance policies with principal and income redeemable by the insured or its beneficiaries

Investment certificates or capitalization operations

Retirement or pension funds

Fixed income and variable income securities

Credit operations, including financial resource loans, in which the debtor is resident or domiciled abroad

Derivatives and equity interests (unless treated as controlled entities abroad), including acquisition rights

In view of this scenario, it is important to note that the taxable event (income tax liability arising from these assets) occurs when the income is effectively made available, resulting in additional basis on the monthly calculation. However, the time of effective payment of the applicable income tax has changed and, therefore, the income will be taxed at rate of 15% at the time the annual Income Tax Return is filed.

  04/09/24  Hi Abthree, similar question from myside too can I ask for your accountant details as well I need to get affairs sorted out and need some advise if possible
   

    -@sappaulcook

See my direct message

AB3 -- 04/09/24

Keep in mind the number of days inside brazil to be considered a tax resident. 

Since Brazil does not have a golden visa special tax treatment, this puts a negative reason to retire in Brazil if one wants to have savings or retirement account in Brazil.

Thanks to Lula and his social programs and his backers payroll

If you are a UK national Double Taxation may not apply

[link under review]

My first reading of the new law would indicate that Capital gains and dividends realized in investment (post-tax) accounts are taxable.  Since I'm already paying US taxes on these anyway, and my US tax return is part of the input in preparing my Brazilian return, I'm expecting little or no change in my Brazilian taxes;

@abthree

Keep in mind, the US has a sizable exemption for capital gains and dividends. Brazil doesn't have that, so you'll get hit with the higher of the two taxes, which will be Brazilian.

04/15/24 @abthree
Keep in mind, the US has a sizable exemption for capital gains and dividends. Brazil doesn't have that, so you'll get hit with the higher of the two taxes, which will be Brazilian.   

    -@guerneca

I don't have any appreciable exemptions on my US return, sizeable or otherwise, for my capital gains or dividends.  So I don't anticipate any major problems.

    04/15/24 @abthreeKeep in mind, the US has a sizable exemption for capital gains and dividends. Brazil doesn't have that, so you'll get hit with the higher of the two taxes, which will be Brazilian.        -@guerneca

I don't have any appreciable exemptions on my US return, sizeable or otherwise, for my capital gains or dividends.  So I don't anticipate any major problems.
   

    -@abthree

The first $44,625 of capital gains are exempt from tax in the US. That's not the case in Brazil. That means you'd end up with higher taxes going to Brazil than the US.

Same thing for (qualified) dividends.

04/15/24  The first $44,625 of capital gains are exempt from tax in the US. That's not the case in Brazil. That means you'd end up with higher taxes going to Brazil than the US.
Same thing for (qualified) dividends.
   

    -@guerneca

Again, not on my tax return they aren't.  I have no idea where you get your information.  Maybe it's true for you:  everybody's tax situation is different.  But I know what my taxes are, and your description does not match them.  At all.

    04/15/24  The first $44,625 of capital gains are exempt from tax in the US. That's not the case in Brazil. That means you'd end up with higher taxes going to Brazil than the US.Same thing for (qualified) dividends.        -@guerneca

Again, not on my tax return they aren't.  I have no idea where you get your information.  Maybe it's true for you:  everybody's tax situation is different.  But I know what my taxes are, and your description does not match them.  At all.
   

    -@abthree

One of many sources: https://www.nerdwallet.com/article/taxe … ax%20rates

Maybe there are other things that can influence the tax as well. Anyway this might not apply in your case, it can definitely impact others. Or so it appears to me from reading it. I'm not a tax professional,  though.

04/15/24 As I never tire of saying, everyone's tax situation is different, so the only tax advice I ever give is that expats should find advisors on both the home country and Brazil sides that the trust, and then follow their counsel.

And that advice, I follow myself.

        04/15/24 @abthreeKeep in mind, the US has a sizable exemption for capital gains and dividends. Brazil doesn't have that, so you'll get hit with the higher of the two taxes, which will be Brazilian.        -@guernecaI don't have any appreciable exemptions on my US return, sizeable or otherwise, for my capital gains or dividends.  So I don't anticipate any major problems.        -@abthreeThe first $44,625 of capital gains are exempt from tax in the US. That's not the case in Brazil. That means you'd end up with higher taxes going to Brazil than the US.Same thing for (qualified) dividends.        -@guerneca

The assertion that the first $44,625 of capital gains are exempt in the US is not necessarily true.

The $44,625 figure cited actually refers to your total taxable income, not just capital gains.

So if your taxable income excluding capital gains happens to be over that, then exactly $0.00 of your capital gains will be tax-exempt.

@abthree

Very sound advice.

   
        04/15/24 @abthreeKeep in mind, the US has a sizable exemption for capital gains and dividends. Brazil doesn't have that, so you'll get hit with the higher of the two taxes, which will be Brazilian.        -@guernecaI don't have any appreciable exemptions on my US return, sizeable or otherwise, for my capital gains or dividends.  So I don't anticipate any major problems.        -@abthreeThe first $44,625 of capital gains are exempt from tax in the US. That's not the case in Brazil. That means you'd end up with higher taxes going to Brazil than the US.Same thing for (qualified) dividends.        -@guerneca

The assertion that the first $44,625 of capital gains are exempt in the US is not necessarily true.

The $44,625 figure cited actually refers to your total taxable income, not just capital gains.

So if your taxable income excluding capital gains happens to be over that, then exactly $0.00 of your capital gains will be tax-exempt.
   

    -@Marcos999

Thanks for clarifying. I think for folks retired on investments who have no other income other than dividends and capital gains, would this hold true? Or do they lump in dividends and capital gains into total income as well? Let's take a few scenarios:

Capital gains of $44,625 and no other income

Dividends of $44,625 and no other income

Capital gains of $44,625 and dividends of $44,625 and no other income

Would be helpful to understand. I don't know how to really run simulations on this sort of stuff easily, so I'm just going off what I find online.

@guerneca

No problem.  It can get quite complicated, depending on your overall tax position.  I  would just stress that I am not a tax lawyer or CPA so I would not like to give tax advice, but in toying (quickly) with the online calculator in the link you shared here, it seems to do a decent job of simulating the very scenarios that you just inquired about. 

Catching up here after a long hiatus!

I hate to say it, but people here have been COMPLETELY missing the boat in terms of which are the changes that actually matter with this new law,  how this actually affects expats, and as to what potentially would be worth inquiring of our accountants.

Before this Lei 14.754/2023, which took effect as of January 1 of this year, expats had two huge local tax advantages: 

• Overseas investments originally denominated in foreign currency were formerly exempt from local [capital gains] taxes resulting strictly from currency changes versus the Brazil Real.  Think:  local cap gains taxes on your investments resulting solely from the long-term devaluation of the Brazil Real.  Any one here not affected?

• Expats with investments pre-residency (who doesn't?) were formerly exempt from ALL (currency and otherwise) local capital gains taxes resulting from the eventual sale of those investments after becoming a tax resident.

Needless to say, this tax measure is somewhat of a frontal assault for expat tax residents here, and I'm very surprised that, unless I missed it, there was zero mention of these measures here.

Yes, there are a number of unanswered questions which will certainly need to be addressed to our accountants.  An opportunity for them to prove their worth and for us to assess their actual know-how.

There are also some mitigants here, which we can also discuss, if of interest.

Finally, if of interest I would be pleased to post the exact citations in the former and current laws addressing these changes.

Disclaimer:  Please note that I am not a tax lawyer or CPA by trade but merely a long-term expat who follows this stuff closely owing to his work history here/overseas.

Everyone's definition of what might affect them tax-wise, and each individual's situation is different, and there is no one-size-fits-all in this regard.

Suffice to say I may regard my tax situation in Brazil x the UK very differently from the next man, but I am quite confident in what I pay, where and when. I have advised on this on this forum previously, and people can accept that or challenge it as they wish, but tax responsibility is a personal issue, and is not the same for everyone.

If anyone is concerned then consult your accountant, is the best advice we can give here.

@Peter Itamaraca

Absolutely.

My point is simply that, with these changes to the local tax treatment of our overseas investments, it's probably worth checking in with our local accountants to see how they might affect our individual tax positions and what, if any, tax planning changes they would recommend.   

I am going to repost this about the new tax. Also when you compair tax rates for different countries. if you earn more than 11,000 dollars and above your tax in Brazil is at the max 27%.

Tax Rate

MONTHLY Taxable Income    Rates (2023)

From BRL 1.903,99 to 2.826,65    7.5%

From BRL 2.826,66 to 3.751,05    15%

From BRL 3.751,06 to 4.664,68    22.5%

Over BRL 4.664,68    27.5%

Here is a direct copy from the Tax article

The Law defines financial investments broadly under the new taxation regime to include any financial operations outside the country, such as:

Interest-bearing bank deposits

Interest-bearing certificates of deposits

Virtual assets

Digital wallets or checking accounts with income

Shares of investment funds, except those treated as controlled entities abroad

Financial instruments

Insurance policies with principal and income redeemable by the insured or its beneficiaries

Investment certificates or capitalization operations

Retirement or pension funds

Fixed income and variable income securities

Credit operations, including financial resource loans, in which the debtor is resident or domiciled abroad

Derivatives and equity interests (unless treated as controlled entities abroad), including acquisition rights

In view of this scenario, it is important to note that the taxable event (income tax liability arising from these assets) occurs when the income is effectively made available, resulting in additional basis on the monthly calculation. However, the time of effective payment of the applicable income tax has changed and, therefore, the income will be taxed at rate of 15% at the time the annual Income Tax Return is filed.

Here is a link that explains the new law.

https://www.ey.com/en_gl/tax-alerts/bra … w%20law%20(Law%2014%2C754,closed%2Dend%20funds%20in%20Brazil.

here a site that talks about crypto and the tax

https://www.coindesk.com/policy/2023/11 … eport/amp/

@Marcos999 please refer to my post above  that give the overall view of the new law and what your going to be tax on in Brazil. Your explanation was very close to correct. Hope this helps

A step back to square one:

How does one find a good, trustworthy accountant, knowledgeable about both US and Brazil tax laws?  I am NOT convinced my accountant is right for me.  His experience has not been with US expats, but rather with Brazilians currently or previously living in the US, with funds in both countries.  He was recommended by former US residents who have returned to Brazil.  I use Expat HRBlock for my US taxes.  A complicating factor this year is that the form K-1 from a family Trust my brother set up will not be available until late September, thus requiring the payment of estimated taxes for the requested extension.  In other words, although the basics are pretty straightforward, the Trust and need to extend have complicated the situation.

Advice and/or referrals welcome.

Brazil does not have a totalization agreement with the usa. It also does not have a tax treat with the USA. Go to IRS link below to see all countries with US income tax treaties.  BRAZIL  IS NOT ONE OF THEM. https://home.treasury.gov/policy-issues … y/treaties

The information on Taxes in the expat.com page link below is WRONG.

https://www.expat.com/en/guide/south-am … razil.html