Federal Revenue Service’s Normative Rule No. 1732 (IN 1732) came into force on August 29, 2017 to amend a 2014 rule (Normative Rule No. 1455/14) providing for the rates of capital gain generated by a non-resident entity as a result of a sale of any items recorded as the entity’s non-current assets located in Brazil.
Prior to the new rule, a fixed 15% rate was applicable. Now, under the new IN, the 15% rate will apply only to those capital gains not exceeding BRL 5 million; a 17.5% rate will apply to gains from BRL 5 million to BRL 10 million; a 20% rate will apply to gains from BRL 10 million to BRL 30 million; and a 22.5% rate will be applicable to gains exceeding BRL 30 million.
It is worth mentioning that the taxation of capital gain is regulated by Law No. 8,981/95, as amended by Law No. 13,259/16. This IN merely reflects the legislation as recently amended.
The IN also provides for the withholding and payment of the income tax withheld at source as a result of capital gain. It also determines that the fixed 15% rate will apply with respect to taxable events occurred on or before 12/31/2016. In any case, taxpayers should check if there is any double tax treaty in place between Brazil and the country of the company to avoid double taxation.
