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Taxation of earnings and income from abroad: how to calculate and declare

November 21st, 2018
Vinicius Tersi

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Opinion

We are often called upon by our clients to assess personal income tax on gains and losses on financial assets abroad (shares), bonds(dividends and interest). Unfortunately, the rules for calculating gains and income from abroad are very different from those used for Brazilian sources, and quite unfavorable. In many ways, Brazilian legislation discourages tax residents in Brazil from acquiring financial assets abroad directly.

The purpose of this text is to describe how individuals calculate gains and income from assets abroad and how they are taxed. We have already had the opportunity This article describes how assets in foreign currency should be reported to the Federal Revenue Service (RFB) via the income tax return (DIRPF), as well as to the Central Bank via the Statement of Brazilian Capital Abroad (CBE). This text goes a little further, describing how to report changes in the taxpayer's asset position in the DIRPF and CBE.

Difference between earnings and income in foreign currency: general rule

Brazilian tax legislation, as far as gains and income relating to foreign assets held in foreign currency by individuals are concerned, is very unclear and not very similar to the rules applicable to assets located in Brazil.

For a first approximation, we can summarize the general rule as follows:

Type of Income Earned Abroad	Tax treatment	Observations
disposals of assets or rights acquired in any way in foreign currency settlements or redemptions of financial investments acquired in any capacity in foreign currency	Capital gain	progressive rate of 15%-22.5% (except in succession cause of death and donation, where is 15%) same exemptions or reductions for goods located in Brazil different rules for acquisitions based on income originally earned in Brazilian reais or in foreign currency cleared transaction by transaction no loss compensation
disposals of foreign currency held in cash	Capital gain	progressive rate of 15%-22.5% exemption from disposal of up to USD 5,000/year cleared transaction by transaction no loss compensation
results of rural activities carried out abroad	Rural activity	progressive tax rates of up to 27.5% calculated annually, separately from the results of rural activity in Brazil Allows compensation for losses abroad
other income received from sources located abroad	Lion card	progressive tax rates of up to 27.5% monthly payment, depending on the month of receipt, and annually in the DIRPF

In addition to the fact that there are four different tax treatments for gains and income earned abroad, the calculation needs to take into account the conversion of amounts in foreign currency into reais. Furthermore, it is worth noting that the four tax treatments apply five different conversion methods. So this kind of complexity makes it very difficult for individuals to comply faithfully with Brazilian tax legislation.

To facilitate understanding, we will deal with each of the above items separately, focusing mainly on financial assets abroad. Therefore, we will not elaborate on the results of rural activity abroad in this text.

Taxation of foreign earnings and income – Capital Gains in Foreign Currency

Firstly, in our text on how to declare assets abroadIn the article, we stated that, as a rule, assets abroad should be reported at historical acquisition cost. There we don't detail how to do this, which is important for calculating capital gains in foreign currency, and applies to assets and financial investments (shares, bondsinvestment fund shares) as well as for real estate and other assets and rights.

Taxation of foreign earnings and income - How to calculate the acquisition cost

The procedures were regulated by SRF Normative Instruction no. 118/2000. With effect from 01.01.2000, the legislation requires the cost of acquiring assets abroad to be classified according to the origin of the income used to acquire them.

There are three possible situations, with their consequences summarized in the table below:

Source of funds used to acquire assets abroad	Acquisition cost, for the purposes of calculating income tax	Example
Earnings in Reais	Convert into reais at the selling price published by the Central Bank for the date of the respective acquisition	Taxpayer received salary in Brazil in Brazilian reals and sent the money abroad, acquiring the asset
Earnings in Foreign Currency	Convert from foreign currency to US dollars on the date of acquisition	Taxpayer received remuneration in foreign currency for services rendered abroad and used its value to acquire the asset
Earned partly in Reais and partly in Foreign Currency	Each part is converted according to the rules above, in proportion to the acquisition cost in foreign currency	Taxpayer sent funds from Brazil abroad to invest in a financial investment (part of which originated in income earned in Brazilian Reais) and reapplied the interest on said investment (part of which originated in income earned in foreign currency)

Taxation of foreign earnings and income - How the tax amount is calculated

To make it easier to understand, we have listed the rules for calculating the IRPF tax base for one of the three hypotheses above:

1) Assets acquired with income originally earned in Brazilian Reais

To calculate the tax base, the values of the sale and the acquisition cost are converted into Brazilian reais and the tax due is then calculated.

the value of the original investment expressed in foreign currency (e.g. pounds sterling) must be converted into US dollars (sales parity) and then into Brazilian reais at the dollar rate set by the Central Bank of Brazil for sales on the date of the investment;
when there is a sale, liquidation or redemption, the amount earned must be converted into US dollars (purchase parity) and then into reais, at the dollar rate set by the Central Bank of Brazil for purchase on the date of receipt;
if the value of the investment is sold, liquidated or partially redeemed, the weighted average cost is calculated in proportion to the portion of the investment made;
the positive difference between the amount received and the proportional cost will be the capital gain in foreign currency, taxable at the rate of 15%-22.5% currently (except in succession cause of death or donation, which is 15%).

Tributação de ganhos e rendimentos do exterior

2) Assets acquired with income originally earned in foreign currency

To calculate the tax base, you convert the sale price and the acquisition cost into US dollars. Once you have done this, you convert the amount of the capital gain from US dollars to Brazilian reais and then calculate the tax due.

for the purposes of filling in the declaration of assets and rights, the value of the investment expressed in foreign currency (e.g. pounds sterling) must be converted into US dollars (parity of sale) and then into reais, at the dollar rate set for sale by the Central Bank of Brazil on the date of the investment;
when there is a sale, liquidation or redemption, the amount received must be converted into US dollars (purchase parity) for the date of receipt;
the positive difference between the amount received in U.S. dollars and the original amount or acquisition cost in U.S. dollars must be converted into Reais using the dollar rate set by the Central Bank of Brazil for purchase on the date of receipt;
the positive difference in reais of the capital gain calculated in US dollars will be the capital gain in foreign currency, taxable at the rate of 15%-22.5% currently (except in succession cause of death or donation, where it is 15%). Any difference in amounts in Brazilian Reais must be reported on the "Exempt and Non-Taxable Income" form, on the "Other" line.

3) Assets acquired with income originally earned partly in reais, partly in foreign currency

The calculation basis is proportionalized between each of the sources, applying the respective rule above to each. It should be noted that interest on financial investments in foreign currency available for withdrawal, even if they are not redeemed, are considered zero-cost capital gains by the RFB. And reinvestment is treated as income earned in foreign currency.

Consequence of the above classification

The practical consequence of classifying the asset in one of the above categories is the fact that the exchange rate variation between the US dollar and the Brazilian real is not considered in the income tax base when the origin of the acquisition is income earned in foreign currency.

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.

If, however, the share was acquired with income earned in Brazilian reais, the above values must be converted into Brazilian reais according to the official exchange rate on each date. Thus, the acquisition cost was 1,000 reais (exchange rate 1:1) and the sale price was 3,000 reais (exchange rate 3:1). In this case, there was a taxable capital gain of 2,000 reais (the positive difference between 3,000 and 1,000). So it's clear from this example that Brazilian taxation was only levied on the exchange rate variation between the Brazilian real and the US dollar during the period.

Why it's not easy to classify assets abroad according to the above rule

Distinguishing which of the above categories an asset should be classified in is, in practice, extremely difficult. This is because the above classification was created by SRF Normative Instruction no. 118/2000and not by legal provision, the article 24 of Provisional Measure no. 2.158-35/2001. Therefore, the law does not define how to classify correctly, leaving the task to the taxpayer.

As it stands, the legislation obliges the taxpayer to keep a record of (i). the value in reais on the date the asset was acquired, (ii). the value in foreign currency on the date the asset was acquired and (iii). the origin of the funds used to acquire the asset. The IRS has only clarified very specific situations, but with no legal basis, which do not point to a clear rule:

income from financial investments in foreign currency, even if derived from income originally earned in Reais, will be considered income originally earned in foreign currency;
- If the interest credited can be withdrawn by the beneficiary, income tax is levied on the capital gain, considering its acquisition cost to be zero;
in the event of an asset, right or financial investment transferred by an individual who is a tax resident in Brazil, in cases of inheritance, donation and also dissolution of the marital partnership or stable union, the type of income originally earned by the individual will be considered. deceasedthe donor or ex-spouse and used in the acquisition of the good or right or in the realization of the financial investment;
if the transfer was made by a non-resident individual, the rules on financial investments and assets or rights acquired with income originally earned in foreign currency will apply.

It's worth noting that one important situation is still missing.

Suppose that the proceeds from the sale of the share in the previous example, worth 1,000 US dollars, are used to buy a bond (bond) from the US Treasury. In order to classify the origin of the funds used to acquire the security, it is important to know what was the origin of the funds used to acquire the share sold? O IRPF 2019 Questions and Answers ManualQuestion 602 states that capital gains obtained from the sale of goods or rights abroad are considered to be income originally earned in foreign currency. But does this apply to all of the sale proceeds used to acquire the security, or only to the part that was taxed as a gain?

The fact is that not even the positions taken by the IRS on the subject are consistent. There are, for example, consultation solutions that contradict each other on this point (6th RF Consultation Solution no. 175/2010 e 8th RF Consultation Solution no. 115/2009).

Taxation of foreign earnings and income - What can be done?

Given the lack of clarity in the tax legislation on the subject, the best position is to analyze the documentation on the origin of the assets abroad. If the practical situation corresponds to one of those clarified by the IRS, there is good justification for adopting the same procedure. Otherwise, it is necessary to check which classification is best supported by the available documentation.

The legislator, it seems, had the good intention of wanting to tax the exchange rate variation only when there was an actual increase in assets (assets bought with funds leaving Brazil in reais being sold for a higher value in reais), and not a nominal one (origin in foreign currency). But the legislation made a rather artificial distinction in order to achieve its objective, and the Federal Revenue Service was unable to provide secure regulation.

Other aspects of capital gains in foreign currency

For assets and rights located in Brazil, tax legislation allows taxation on capital gains (real estate, movable property, shareholdings and financial assets acquired over-the-counter, in general) or on net gains (financial assets acquired on the stock exchange or over-the-counter market, as a rule). In the second case, losses can offset gains, reducing the tax base.

Although there are restrictions on this compensation, the fact is that there is no equivalent rule for the acquisition of financial assets abroad. Thus, the legislation on capital gains in foreign currency is particularly unfavorable to investments in financial assets abroad. In addition to the impossibility of offsetting losses, transactions must be reported in the DIRPF on a transaction-by-transaction basis. This is the opposite of what happens with financial assets held on the stock exchange in Brazil, for which net gains are grouped month by month.

On the other hand, the IRS informs us that the IRPF exemption on the sale of small assets, applicable in Brazil up to the limit of R$ 20,000/month (for shares listed on the stock exchange) or R$ 35,000/month (other assets and rights) also applies to assets abroad. For assets abroad, the higher limit of R$ 35 thousand/month applies in all cases, including for shares listed on a foreign stock exchange (IRPF 2019 Questions and Answers ManualQuestion 633).

Taxation of foreign earnings and income - On Foreign Currency Held in Specie

The hypothesis of capital gains on foreign currency held in cash is quite marginal in practice. These are gains made from buying and selling foreign currency. This is what happens, for example, in the case of someone who buys euros in order to make a speculative gain from exchange rate fluctuations. Or just to spend on a trip abroad.

Therefore, the applicable legislation mandates that the difference in reais between the disposal value and the respective acquisition cost be taxed as a capital gain. The conversion of the values into reais takes into account the average monthly exchange rate of the dollar, for sale, published by the RFB. This is a very different rule to that applicable to other capital gains in foreign currency. Therefore, in order to control the acquisition cost, each foreign currency (euro, dollar, yen) must be calculated separately at its weighted average cost.

For this specific case, the capital gain is exempt if the total disposal of foreign currency held in cash during the calendar year is equal to or less than 5,000 US dollars. On the other hand, the exemption for the sale of goods of small value for up to R$ 35,000/month does not apply.

The control of these transactions is complex and impractical, as the RFB maintains the understanding that it is a disposal of foreign currency held in cash including the spending of currency to pay travel expenses, either in cash or represented by traveler's checks (IRPF 2019 Questions and Answers ManualQuestion 604). ThereforeTo comply with the control required by the RFB would mean knowing how much was spent each month in order to calculate the exact amount of the IRPF. This during a trip abroad that started one month and ended the next

Taxation of foreign earnings and income - Other income from sources located abroad

Income from sources abroad is subject to mandatory monthly tax payment (carnê-leão). Regardless of where it was earned or where the funds are kept. Once again, it doesn't matter whether the funds have been repatriated to Brazil or not, it's enough that the income is available to the taxpayer.

In order to calculate the amount of foreign source income in reais, the amount in foreign currency (for example, pounds sterling) must be converted into US dollars at the purchasing parity between the two currencies on the date of receipt. So, assuming the income is received on October 1, 2019, the purchasing parity between the foreign currency and the US dollar on the same day should be used. Thus, for each income received during the month of October 2019 there will be a different parity for converting the foreign currency into US dollars.

Converting the dollar into reais

The next step is to convert the amount in US dollars into Brazilian reals at the buying rate given by the Central Bank for the last working day of the first fortnight of the month prior to receipt. Meanwhile, for an income received on October 1, you should look for the exchange rate on September 15. Since September 15, 2019 was not a working day, you should look for the 13th to find the last working day of the first fortnight, and so on. Using this method, you can convert all the income you received in October 2019 from US dollars to Brazilian reais. This at the exchange rate on the same date (September 13, 2019).

Income from abroad is added to other income subject to the same regime in Brazil (such as unpaid work, rents or other income). In addition, this income can take advantage of the same deductions (alimony, dependents, as well as social security contributions due in Brazil). From the sum of the income and the use of the deductions, the amount of the monthly IRPF due is calculated, at progressive rates of up to 27.5%.

According to the RFB, these rules also apply to profits and dividends received by the taxpayer from a company domiciled abroad, whether credited to a bank account held abroad or remitted directly to Brazil (IRPF 2019 Questions and Answers ManualQuestion 124). Thus, a share listed on a foreign stock exchange will have its income (dividends) taxed by the taxman. In addition, its sale will be taxed as a capital gain in foreign currency. Meanwhile, interest on a financial investment abroad is treated as capital gains (both principal and interest).

Comments on the impact of asset movements on the CBE

It is worth remembering the importance of informing the Central Bank about the assets and rights held abroad by a person who is a tax resident in Brazil. This information must be provided through the declaration of Brazilian capital abroad (CBE)..

As far as the subject of this text is concerned Taxation of foreign earnings and incomeThe CBE contains a number of fields on income from assets held by the declarant on the base date (usually December 31). For some assets, such as shares and investment fund quotas, information is requested on dividends or other income distributed to the declarant during the period. It is not necessary to report transactions involving the purchase or sale of assets abroad.

On this blog you will always find relevant informationas well as We will also provide you with guidance on how to avoid problems with the tax authorities and other authorities. Feel free to tell us about your experience, share the content with other friends who need guidance and contact us by e-mail at contato@tersi.adv.br or via WhatsApp. Click here to send a message now.

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Check out more posts on taxation and estate planning at information for residents abroad.

This text about Taxation of foreign earnings and income was prepared by Vinícius Tersi Advocacia, a law firm specializing in International Tax Consulting.

Author

Vinicius Tersi

Vinicius Tersi is a lawyer and specialist in international tax law. He also has a degree in Accounting and a Master's in Tax Law from USP, and is familiar with different legal and accounting systems. He specializes in international transactions for entrepreneurs and families with tax residency and assets in multiple jurisdictions. He is qualified to act in Brazil and Portugal.

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Comments

Este tópico contém 34 respostas, 25 vozes e foi atualizado pela última vez 1 ano, 2 meses ago por Jorge Alencar.

Visualizando 34 respostas da discussão

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- 21 de November de 2018 at 2:45 pm #6274
  
  Vinicius Tersi
  Keymaster
  
  0
  ::
  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]
- 6 de January de 2022 at 8:36 pm #7931
  
  Cassian
  Participant
  
  0
  ::
  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?
- 7 de January de 2022 at 12:11 pm #7932
  
  Vinicius Tersi
  Keymaster
  
  0
  ::
  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!
- 23 de March de 2022 at 1:19 pm #7933
  
  Henry
  Participant
  
  0
  ::
  Hello, how does the tax return work in the following case?
  
  Receipt in dollars (sale of asset) and a foreign account (also originating from a foreign account) but both resident in Brazil ?
- 24 de March de 2022 at 8:41 am #7934
  
  Vinicius Tersi
  Keymaster
  
  0
  ::
  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!
- 28 de March de 2022 at 3:29 pm #7935
  
  Carolina
  Participant
  
  0
  ::
  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
- 30 de March de 2022 at 4:48 pm #7936
  
  Rodrigo Figueiredo
  Participant
  
  0
  ::
  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.
- 2 de April de 2022 at 10:53 pm #7937
  
  José Henrique
  Participant
  
  0
  ::
  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!
- 4 de April de 2022 at 3:16 pm #7938
  
  Vinicius Tersi
  Keymaster
  
  0
  ::
  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!
- 8 de April de 2022 at 8:34 am #7939
  
  Nicole Quinderé duarte
  Participant
  
  0
  ::
  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.
- 11 de April de 2022 at 2:45 pm #7940
  
  Vinicius Tersi
  Keymaster
  
  0
  ::
  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!
- 12 de April de 2022 at 9:54 am #7941
  
  Vinicius Tersi
  Keymaster
  
  0
  ::
  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!
- 13 de April de 2022 at 4:29 pm #7942
  
  Vinicius Tersi
  Keymaster
  
  0
  ::
  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!
- 15 de April de 2022 at 10:30 pm #7943
  
  Leonardo
  Participant
  
  0
  ::
  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?
- 16 de April de 2022 at 3:24 pm #7944
  
  Vinicius Tersi
  Keymaster
  
  0
  ::
  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!
- 16 de April de 2022 at 8:43 pm #7945
  
  Leonardo
  Participant
  
  0
  ::
  Thank you very much for your reply!
  This impasse will require us to rethink our operational investment strategy.
  If you plan to publish your studies on Cosit Consultation 115/2021, we'll look forward to it! I have recommended your website to the investors I know.
  Cheers!
- 18 de April de 2022 at 6:05 pm #7946
  
  Vinicius Tersi
  Keymaster
  
  0
  ::
  Thanks for that, Leonardo!
- 22 de April de 2022 at 6:19 pm #7947
  
  Lucio
  Participant
  
  0
  ::
  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
- 25 de April de 2022 at 4:21 pm #7948
  
  Claudia
  Participant
  
  0
  ::
  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
- 28 de April de 2022 at 10:59 am #7949
  
  Vinicius Tersi
  Keymaster
  
  0
  ::
  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!
- 4 de May de 2022 at 12:01 am #7950
  
  Fernando
  Participant
  
  0
  ::
  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.
- 15 de May de 2022 at 11:47 pm #7951
  
  Bruna
  Participant
  
  0
  ::
  Hello, Vinicius! How are T Bonds taxed when we buy them through an international account as a PF here in Brazil versus as an offshore company?
  
  Thank you so much!
- 29 de May de 2022 at 12:18 pm #7952
  
  Vera Fernandes
  Participant
  
  0
  ::
  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.
- 27 de July de 2022 at 2:09 pm #7953
  
  WILSON AMARAL JORGE
  Participant
  
  0
  ::
  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,
  Wilson
- 29 de July de 2022 at 11:14 am #7954
  
  David B. Svaiter
  Participant
  
  0
  ::
  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.
- 13 de September de 2022 at 9:28 pm #7955
  
  João Luiz
  Participant
  
  0
  ::
  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!
- 17 de November de 2022 at 10:55 am #7956
  
  Shayana Surya Diniz Carvalho
  Participant
  
  0
  ::
  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?
- 24 de December de 2022 at 3:18 am #7957
  
  Leo
  Participant
  
  0
  ::
  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?
- 2 de February de 2023 at 11:34 am #7958
  
  Claudia Maria Carvalho
  Participant
  
  0
  ::
  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.
- 17 de February de 2023 at 2:23 pm #7959
  
  Junior
  Participant
  
  0
  ::
  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.
- 23 de February de 2023 at 12:30 am #7960
  
  Jorge
  Participant
  
  0
  ::
  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?
- 7 de April de 2023 at 7:27 am #7961
  
  Neusa Maria Hess
  Participant
  
  0
  ::
  Good morning Dr. Tersi! Your explanations are very clear and important. Thank you very much for the information. I'm Brazilian, elderly and I'm going to send you an e-mail. Thank you very much.
- 7 de May de 2023 at 8:49 pm #7962
  
  Bruno Melo
  Participant
  
  0
  ::
  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,
- 22 de June de 2023 at 10:58 am #7963
  
  Antonio Stefanini
  Participant
  
  0
  ::
  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?
- 8 de September de 2023 at 1:13 pm #7964
  
  Jorge Alencar
  Participant
  
  0
  ::
  Good afternoon, Dr. Tersi. Congratulations on your article. I have a daughter who has been working for an American multinational for 3 months and receives 50 shares a month from the head office as part of her salary. Are these shares subject to monthly payment by the "carnê leão"?
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