New MP Reduces Income Tax Exemption for Foreign Investments


On April 30, 2023, the federal government issued MP 1171/23, bringing a series of changes to the taxation of individuals. Starting in 2024, income derived from financial investments abroad will be subject to tax rates ranging from 0% to 22.5%, depending on the gains obtained.

Before the change, the income tax exemption rate for individuals with income from foreign investments was higher. If an individual carried out sales, redemptions, or settlements of assets, and these operations generated a profit below R$ 35,000 in a single month (considering all foreign alienations in that month), they were exempt from income tax.

It should be noted that the new taxation will affect all financial investments or offshore investments, including bank deposits made abroad, shares in investment funds (except those treated as entities controlled abroad), fixed-income and equity securities, and dividend income.

The change not only affects small investments by foreign investors but also structures of holdings and trusts held abroad by high-net-worth individuals. The government’s goal is to require the taxation of annually earned income, creating new events that trigger the tax collection.

Furthermore, the MP includes a provision to encourage investors to update the declared value of their foreign investments to the market value at the end of this year. To do this, it establishes a 10% tax rate, lower than the standard rate, for those who choose to update their investments at the end of 2022.

Another change introduced by the MP that benefits individuals is the increase in the income tax exemption threshold, which now stands at R$ 2,640. Additionally, the minimum wage has been set at R$ 1,320, as announced by the federal government at the beginning of the year.

All of these measures are part of the government’s goal to collect R$ 3.2 billion this year, which would cover the impact of the increased income tax exemption threshold granted to individuals, to enable the fiscal framework without significant revenue loss in the government’s coffers.


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