On December 13th, Law 14,754/23 was sanctioned, which provides for taxation on foreign investments, known as offshore investments, and exclusive funds. Taxing these investments is considered a key component by the Ministry of Finance to raise approximately R$ 20 billion by 2024, with the goal of eliminating the deficit in public accounts.
In the current scenario, the taxation of offshore investments only occurs when a foreign-based company transfers profits to an individual shareholder in Brazil. If the shareholder chooses to keep the funds abroad, taxation is postponed and, in some cases, can even be avoided.
From now on, taxation will be established at a fixed rate of 15%, regardless of the amount of income, and will be done annually.
According to the text of the law, the exchange rate variation of deposits in a current account or in a debit or credit card abroad will not be subject to taxation, provided that the deposits are not remunerated and remain in a foreign financial institution recognized and authorized to operate by the monetary authority of the country where it is located.
It is worth noting that the exchange rate variation of foreign currency in cash will not be taxed up to the equivalent sale limit of US$ 5,000 (approximately R$ 25,000) annually.
Regarding exclusive funds, which are customized products for one or a few investors, typically members of the same group or family, taxation only occurs at the time of redemption. According to federal government data, approximately 2,500 Brazilians have resources invested in these funds, totaling R$ 756.8 billion, representing 12.3% of the country’s funds.
As established by the new law, income from investment funds will be subject to periodic semiannual taxation, known as “come-cotas,” with rates of 15% for long-term funds and 20% for short-term funds.
The law also provides for an 8% rate for those who choose to update their income by December 31st of this year. Taxation will apply to both exclusive funds and offshore investments, being optional for the latter. Starting in January 2024, the rates established for offshore investments and exclusive funds will come into effect.