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We are often called upon by our clients to assess personal income tax on gains and losses on financial assets abroad.
[See the full article at Taxation of earnings and income from abroad: how to calculate and declare] -
During the first half of last year, I received monthly payments for a service I provided under a contract from an institution located in England. I received these amounts in dollars.
Which situation do I fall into? And if I should have declared and paid monthly (which I didn't), how do I declare now that I'm late and how is the fine calculated if there is a fine? Or should I wait to declare it in the DIRPF?
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Hello, Cassiano!
Thank you for your interest in our publications. If I understand correctly, you provided services as an individual (self-employed) for an institution in England, and received these amounts in dollars, correct?
If that's the case, then you should use the "carnê leão". It has its own form for "self-employment", where you can enter the amount you received. A few deductions are also allowed there, depending on how you provided the service. It is also worth checking whether any income tax has been withheld in England to offset the amount in Brazil.
With regard to the fine, if you correct and pay the carnê leão, there will be a late payment fine of 20% of the tax due and interest on the late payment (simple SELIC). Adding it to this year's return and treating it as an adjustment is possible, the return accepts it. However, the law allows the tax authorities to demand an ex-officio fine of 50% of the tax bill not paid at the time, which I have never experienced in practice.
I hope I've helped. If you need a more in-depth analysis, you can contact our team by WhatsApp or email to make an appointment! Cheers!
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Hello, Henrique!
Thank you for your interest in our content. If I understand you correctly, you mean that, as a tax resident in Brazil, you have a bank account abroad (in US dollars), and in it you received the money from the sale of an asset also held abroad (in the same currency). I also understood that this asset abroad, before being sold, had been acquired with funds that you had earned abroad.
If I got the description of the problem right, taxation is as a capital gain in foreign currency, from 15% to 22.5%, and the calculation is made on the capital gain in dollars. Any exchange rate variation from the dollar to the real between the date of purchase and the date of sale of the asset abroad is exempt in Brazil.
As for how to declare it, the sale is reported in the GCAP program and then imported into the income tax return. As for the declaration of assets, the bank account abroad is informed by the bank balance on December 31 of each year, with the value converted from dollars to reais at the purchase price on each base date (December 31 of each year). Any positive exchange rate variation on the account balance is exempt.
Assets abroad are stated at their original acquisition cost, converted from dollars to reais at the selling price. Once sold, it is simply written off.
I hope I've helped. If you need our support, just contact us at WhatsApp or by e-mail contato@tersi.adv.br!
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Good afternoon Vinicius,
I earned RSU's from my company and I want to declare the profit (which was under 35k) in the exempt and non-taxable income section under option 26.
The problem is that because I'm an American company, I don't have a CNPJ. Which CNPJ should I use?
I've tried 00000000000000 but the program won't accept it.
Another question is whether the name of the company should be the brokerage house where the shares were held and through which I received the RSU, or whether it should be the name of the company on the American stock exchange.Thank you
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Hi Vinicius, congratulations on the article... I just had a question about the example you gave when the source of the funds is from abroad.
In a simple example, suppose that a share was bought for 1,000 US dollars when the rate set by the Central Bank was 1:1, and sold for the same 1,000 dollars when the official rate was 3:1. So, if the proceeds used to acquire that share came from foreign currency, the capital gain will be zero. This is because, in US dollars, the difference between the sale price and the acquisition cost was zero.
Shouldn't the difference in reals in this example, R$ 2,000, be included in the IR as exempt? Because if you buy new assets with the same 1,000 dollars, your acquisition cost will be converted by a dollar closer to 3:1. Thank you.
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Hello Mr. Vinícus Tersi!
After researching and reading many articles available on the internet about the taxation of assets and income abroad, I can say that the ones you have written are among the most complete, accessible and enlightening I have found.
I've been reading about the subject since 2018 and to this day I come across "curious" situations arising from our somewhat nebulous legislation.
An example is a sale of a certain asset acquired with funds originally earned partly in reais and partly in foreign currency, where depending on the situation you may have a capital gain in reais and a loss in foreign currency, i.e. the portion of the transaction originally in reais will be subject to taxation while the portion originally in foreign currency will not.
Regarding the situation you described in the article about selling shares abroad and using those funds to buy US Treasury bonds, I have adopted the criterion of reintegrating the funds into cash in the same proportion as the cost of acquiring the asset, except for the portion of the capital gain that I include as "income earned in foreign currency". In this way, the proportion of funds originally earned in reais and in foreign currency is preserved and only changed later with new remittances of funds or new income/capital gains in foreign currency. I believe this is the most prudent criterion from a fiscal point of view and, let's say, "closer" to current legislation.
Congratulations on the site! Greetings! -
Hello, José Henrique!
Thank you for the compliment and for your interest in our content. I agree that the procedure you suggest is quite conservative, and it would be difficult for the tax authorities to question it. In practical terms, the legislation is not unfavorable on this point. I think the bigger point is that it becomes so laborious to make this distinction that even the tax authorities would have problems assessing the taxpayer. I have already researched Carf case law, and the only decision I found dealt only with the burden of proof: if the taxpayer says that the source of the income is one, the burden is on the tax authorities to say otherwise. But how can it say otherwise?
Thank you once again. If you need our support, just contact us at WhatsApp or by e-mail contato@tersi.adv.br!
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Good morning. I liked your article but I have some questions that you might be able to help me with. I'm 18 years old and I'm going to study in the USA. I opened a joint account with my mother here in Brazil in order to have the right to open an account at BB Americas. If I invest money in the USA, would she have to file a tax return or would she only have to file a tax return the following year, as she is my mother's dependent? Thank you for your help.
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Hello, Nicole!
Thank you for your interest. If you are to remain dependent on your mother (and therefore a tax resident in Brazil), then the income from abroad must be reported on your mother's tax return (if any). The way to declare it depends on the type of income, which is what we're talking about here in this text.
I hope I've helped. If you need our support, just contact us at WhatsApp or by e-mail contato@tersi.adv.br!
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Hello, Rodrigo!
Thank you for your question, it's a very good one. Yes, that's exactly what we consider to be correct in this case. As the capital gain is calculated in USD, then any exchange rate variation between USD and BRL is exempt. The GCAP program doesn't account for the exempt exchange variation, so it would be a case of doing it manually and reporting it as exempt income on the tax return, so that the change in equity from one year to the next is correctly justified.
I hope I've helped. If you need our support, just contact us at WhatsApp or by e-mail contato@tersi.adv.br!
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Hello, Carolina!
Thank you for your interest. In the case of the exempt and non-taxable income form, code 26 allows you to leave the CNPJ blank (the American company doesn't have a CNPJ, only a US tax number). It's the American company that's paying the rent, so it would be its name.
I can't tell from the information whether income from RSUs would be reported as exempt income. Under the R$ 35,000/month rule, this would apply to the gain on the sale of shares acquired as RSUs, and not exactly to the vesting of RSUs. I have a text on this on this page.
I hope I've helped. If you need our support, just contact us at WhatsApp or by e-mail contato@tersi.adv.br!
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Hello, Dr. Vinícius!
First of all, congratulations on the content, which was the most enlightening I've ever seen on the subject!
My question refers to COSIT Consultation Solution No. 115/2021 ("SC") on the exemption from Income Tax ("IR") on gains arising from exchange rate variations on deposits in accounts held abroad. If you have any other articles on this subject, I would appreciate it.
In your opinion, how do I classify "NON-INCOME DEPOSIT HELD IN A FINANCIAL INSTITUTION OVERSEAS"? Considering that most of my balance abroad is not directly invested most of the time (it serves as collateral for derivative transactions), would it be considered a non-interest-bearing deposit? On the other hand, could I claim that various trades have taken place over time with varying deposits, so that the entire balance could be considered to be remunerated?
Regarding the calculation, let's assume that a certain amount was remitted at an exchange rate of 4.00, invested at an exchange rate of 4.50, sold without profit in dollars at an exchange rate of 4.50, and remitted to Brazil at an exchange rate of 5 Reais. Would it be acceptable to claim that because I invested the amount I didn't need to tax the exchange rate change from 4.00 to 5.00? -
Hello, Leonardo!
Thank you for your question. By coincidence, I was studying this yesterday Cosit Consultation Solution 115/2021 in detail. I can understand the IRS's logic, but it creates more compliance problems than it solves, as your own question points out.
The Receita's logic was to say that any balance recovered after December 31 would be taxed at 15%, exempting up to the amount the balance was worth on December 31 of the previous year. So it depends on the date you sent the exchange and the date you withdrew it. If you sent the money with an exchange rate of 4.00, on December 31 the exchange rate was 4.50, and when you returned the funds the exchange rate was 5.00, then you would pay IRPF on the difference between 5.00 and 4.50, and not from 5.00 to 4.00. This excessively restrictive view of the law creates this kind of difficulty.
If you use the funds in the account to make financial investments or day-trade operations, this obviously creates an additional difficulty. What would make sense to me is to treat the non-interest-bearing deposit account and the financial investments made with funds held in that account as two separate things. If you have already taxed the investment, it should be considered as a cost of the amount held in the account, rather than being taxed a second time.
This new position contradicts much of what we have been considering up to now, and I have my doubts as to whether it would be accepted by Carf or the courts. In any case, only in a concrete situation will it be possible to form a well-established opinion. Until then, we'll just have to look at the legal risks in the event of an inspection.
I hope I've helped. If you need our support, just contact us at WhatsApp or by e-mail contato@tersi.adv.br!
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Dear Vinicius,
Congratulations... One of the first articles on investing abroad that I've come across that analyzes in detail and correctly the tangle of IRS rules.
Some scenarios that you could tell me would be acceptable for the recipe.
Example: with tax domicile in Brazil, I sent to an account abroad as a resource originally in real, US$1000, exchange rate at R$1.80... I bought $1000 in shares with the dollar at R$2 on the date of purchase and sold them later with the dollar at R$2.50 but I had an effective loss of $100, i.e. instead of $1000 I now only have $900 but the GCAP to be offered for taxation is R$500.00 because the asset was bought with 100% funds originally in real.
What is the amount of the capital gain to be considered as foreign currency for future investments? Or in the event of repatriation, since in my opinion the parties should be taxed differently: the one in foreign currency does not have GCAP, and the one originally in Real for the possible exchange rate variation between sending and returning.
What I have done so far is to consider the equivalent of this GCAP of R$500 above, in USD, that is, $200 as foreign currency, so at the end of this operation I have $200 in foreign currency since I have paid the tax corresponding to this exchange variation, and the rest, $700 remains as currency originally in real. For the next investments, I'll classify them in one of three scenarios: originally in real (up to $700), m.e. (up to $200) or mixed if I use the $900 available.
And if you repatriate these $900, $700 would be subject to GCAP if there was a devaluation of the real from the date of sending to R$1.80 and from the date of receiving, say, R$2.20 and $200 exempt from GCAP on repatriation.
Thank you
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Hello, I was an expat in the USA and returned to Brazil in June last year. Now in March 2022 I received a bonus amount in USD, in my American bank account, referring to the year 2021. I understand that I have to declare and pay tax on this amount via carne leão, correct?
My question is about the taxes withheld at source and already paid in the USA. Can I deduct these taxes from my tax return when calculating the tax to be paid in the month following receipt of this income from abroad? (I couldn't find a double taxation agreement between the USA and Brazil)
Thank you -
Hello, Claudia!
Thank you for your interest in our content. Yes, if you have now received a bonus in the USA as a tax resident in Brazil, it must be submitted to the "carnê leão". Brazil and the USA do not have a double taxation agreement, only reciprocal treatment. In the case of the US, this means that you can offset federal income tax in Brazil, but not state or municipal income tax (if any).
I hope I've helped. If you need our support, just contact us at WhatsApp or by e-mail contato@tersi.adv.br!
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Hello Mr. Vinícius. I accidentally had the good fortune to find and read several complex questions on your site, which you answered clearly. For me it was providential because I have just sold a small property in Miami, acquired as an individual for us$ 220k, with official remittance of foreign currency, in 2011, with the exchange rate of $1.56. The sale price was us$ 405k. In addition to brokerage fees, taxes, etc. they withheld 15% on the amount (+/- us$60k) in income tax. However, I heard that Brazil has a tax agreement with the USA and they said that I can inform the Receita Federal here of the amount of tax I paid there. My question is whether this is correct or whether I'll have to pay another 15% on the capital gain in Brazil, even if I leave the money in America, since the property is listed on my tax return at the historical purchase price.
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Hello, Dr. Vinícius.
Your articles on the taxation of investments abroad are always the most enlightening on the internet.
However, I still don't know how to declare the BB Americas E-money account (interest paid monthly). I imagine it should be declared as an investment (I filled it in as group 4, code 99). However, I'm not sure how to calculate the amount in reais, since the balance on December 31st will be the amount of dollars I deposited throughout the year (originating from an account in Brazil) plus the interest paid over the months. Nor do I know how to pay the IR on the interest credited - but not withdrawn - from the interest-bearing account; as I understand it, the payment is by GCAP, but BB Americas sends an infome with no monthly breakdown.
Thank you. -
Good afternoon, Vinícius,
Beautiful work, congratulations!I have a question about how to report the GCAP/20022 relating to the purchase abroad (USA) of the XOP ETF. I bought it on 3 different dates and sold it all on 06/22/2022.
Purchase 1 on 01/02/2022
Buy 2 on 24/03/2022
Buy 3 on 08/04/2022
Specifically in relation to these 3 purchases, should I use the quote from 08/04, the one from 24/03 or the one from 01/02?
My question arose from the fact that in the GCAP program there is only one field for entering the "dollar rate on the date of acquisition".Cheers,
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Good morning, Vinicius.
I'd like to echo everyone's words: your explanations are complete and very enlightening - my sincere congratulations on both your knowledge and your didactic approach.If possible, I would like to clarify one point: a national bank/brokerage where I have had investments in funds for some years offered me to open an investment account in the USA to invest in shares, with a deadline of 10 days, in accordance with the Central Bank's regulations. So I liquidated an investment in a national fund (withholding the IRPF portion) and deposited it in the account, paying a higher dollar for the purchase (broker's spread) and IOF 0.38%. I intend to keep the shares until I make a reasonable profit, at which point I should liquidate the operation (sell the share) and proceed in one of two ways:
1) Keep most of the balance in US dollars to reinvest in other US stocks.
2) Bring a portion of it back to Reais, so that you can reinvest it in Brazil or just spend it on personal expenses.If possible, could you clarify these points for me?
a) What would be the ORIGIN OF THE RESOURCES? Reais or foreign currency?
b) Will the dollar value used be that of the broker (spread on purchase and repatriation) or the official one?
c) If I were the official, and hypothetically, wouldn't I be pointing to a non-existent profit? After all, the spread actually penalizes the operation, both when converting to USD and when reconverting to Reais.
d) If I sell the share and keep the balance in USD and then reinvest it in the US stock market, will I still have to fill in the GCAP (Capital Gains) form from the IRS if I make a profit?
I'm sorry if I've abused your time and expertise and thank you once again for your attention.
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Hi Vinicius, what's up?
First of all, congratulations on a very comprehensive article!
My question is as follows: I worked in the USA for a while earning in dollars and I kept the capital in an American account, always in balance. That was about 5/6 years ago, and today I'm thinking of repatriating the balance (about 200k dollars), all of which is included in my tax returns.
My question is: the exchange rate variation was very positive from when I received it until today, so do I pay capital gains due to the exchange rate to bring in this capital (dollar origin)? If so, what exchange rate do I use as a reference for the receipt? PTAX on the last day of the year I received it?
If you can help me, thank you!
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Hello, I have a question about the order in which I should write off disposals. Let's say I own 1000 Google shares in local currency and 1000 Google shares in foreign currency. If I sell 800 shares, should I do so in any particular order? Should I write off the domestic currency shares first and then the foreign currency shares? Is there a clear rule on this?
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Hello, Dr. Vinicius,
Congratulations on the content, really the most complete and didactic there is!
Question 1: Can RSUs earned and ESPPs (Shares bought at a discount) from the same company (headquartered in the USA) be part of the same transaction tracking spreadsheet, for the purposes of measuring subsequent average cost for GCAP, or should they be dealt with in separate spreadsheets?
I ask this because the RSU is all earned, so 100% is taxable in Carne Leao. ESPP, in the 85/15 scheme, has 85% as a source of national currency (payroll deduction in Brazil) and 15% that the company gives (this part also goes to carnê leão).
Then, in GCAP, I save this proportionality of Foreign Currency and National Currency for the program to calculate correctly.
When selling the same ticker, it doesn't matter whether it's RSU or ESPP (they're held in different accounts at the broker) and they end up being different sales transactions.
Doubt 2: This capital abroad is in a ratio of 20% Reais (part coming from the salary in the ESPP) and 80% Dollars (part coming from the discount on the price (or rather, supplement paid by the company) in the ESPPs, plus, of course, the RSUs). I'm selling the shares (at a loss) and transferring them to another brokerage account for a new investment. Can I consider these funds as source 100% Foreign Currency, for GCAP purposes?
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Hello Vinícius. Your publications are the most complete I've come across, so I congratulate you and take the opportunity to ask you a question.
I lived in Europe and declared my departure from Brazil approximately 5 years ago. In December 2022 I returned permanently, but I have a property for sale in Europe to be sold in 2023.
How do I bring this amount into Brazil when I sell it and how do I declare it in 2024?
Thank you in advance. -
Dear Tersi,
First congratulations on the site and the quality and accuracy of the information in your posts. I have seen so many wrong suggestions on other blogs, from brokers and investment information, that I worry about those who are starting to invest abroad while residing in Brazil. I always recommend your site.About this post. There are also cases of gains on investments acquired with income in reais in which either there is no taxable CG, or this CG is very small (due to negative exchange rate variation) when compared to a significant effective gain from the investment in US$, for example. In addition to not knowing whether this effective gain should be considered as Foreign Currency when there is no Taxable CG, I am concerned that, as there is no CG, or it is small, how does this significant increase in assets in Goods and Rights without a counterpart in Income look in the DAA because the GCAP did not generate Income. Suj. Tax There is no exchange variation to classify it as exempt (in common parlance, apparently without origin).
I also read your comment on S. Consulta 115 /2021 and it really came to complicate things because abroad the current trading account is an account for moving between applications, receiving dividends, interest on capital, multi-currency FOREX, sometimes it earns interest or not, always tiny, when not negative!
Once again, congratulations on the site and your work, a reference in this field.
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Hello, Vinicius! Congratulations on the content, I hadn't come across anything so detailed until now.
I was wondering if you could answer a question. Take, for example, the dollar equivalent of R$ 70,000 invested in US government bonds maturing in March. If I sell half of these bonds a few days before maturity, would I be entitled to capital gains exemption on this portion? Or would the portion held until maturity be added to the portion sold, making it impossible to exempt the half sold? -
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Good evening, Vinicius!
How are you?I'd like to thank you for your article, because I've searched a lot and haven't found anything as enlightening as your publication, especially regarding the origin of funds for calculating capital gains.
I'd like to give an example of a situation to try and clear up a doubt, if possible.
Example:
I made my first remittance abroad in the amount of 100 USD, which came from income in Reais.So I bought asset X for 50 USD and asset Y for 50 USD.
Soon after, I sold asset X for 60 USD and asset Y for 40 USD.Active transaction X = 60 - 50 = 10 (profit)
Active operation Y = 40 - 50 = -10 (loss)After executing the trades, I would have the same 100 USD I had previously in cash.
However, now the origin of my funds would have changed, with 90 USD originating from income earned in Brazilian reais and 10 USD originating from income earned in dollars?I understand that even if the operations were carried out on the same day and the total balance was equal to 0, there would still be a change in the control of the origin of the funds, and it would be necessary to evaluate each operation individually and not simply add up the total.
Does that make sense?
Thank you,
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Hello, thank you very much for your content. I had a question about the treatment of exchange rate variations on funds originally earned in dollars. For example, I sent 1000 dollars at 1 real to buy a bond in the United States. Six months later I received, as a coupon, 50 dollars at the conversion rate of 2 reais per USD. After another 5 months, the dollar appreciated to 3 reais per USD. I redeemed the 1000 dollars from the bond plus the 50 from the coupon that was in my current account and sent it to Brazil, for a total of 1050 dollars. My question is, should I tax the capital gain resulting only from the part originally in reais (1000 USD)? That would be a profit of 2000 reais, due to the gain of 2 reais per dollar. As for the 50, which are funds originally earned in dollars, is the exchange rate variation between the date of receipt, which went from 2 reais for each dollar to 3, and the date of shipment to Brazil exempt?
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