We are here to talk about Provisional Measure (MP) 1171, published on April 30th.
With it, the federal government makes the fifth attempt to change the taxation of results from investments abroad.
Congress will have 120 days to appreciate and/or amend the text.
Taking into account that this discussion has been going on since 2014, any conclusion now would be too hasty: there is room for much change or even rejection of all or part of this MP.
Anyway, the big news of the provisional measure is that from 2024 income calculated on financial investments, exclusive funds and investment holding companies will be subject to income tax at unified rates. The tax will be calculated annually in the annual adjustment declaration, at a maximum rate of 22.5%.
The MP does not include the taxation of retained earnings in previous fiscal years. However, those who wish to update the value of assets and rights abroad and make the payment by November 30, 2023, may exercise at a rate of 10%. This option must be exercised in the manner and within the period established by the Special Secretariat of the Federal Revenue of Brazil of the Ministry of Finance, in a manner yet to be defined.
Several advantages remain intact or have been added for customers who already have investment structures:
a) Advantage of being able to pay the annual profit to the capital of the company.
b) The investment company or exclusive fund allows the consolidation of investment results considering the possible losses of part of the portfolio, which will not be possible for the Individual investor.
c) Allows the deduction of expenses of the year.
d) Simplifies the transition of succession abroad and avoids high inheritance taxes (Ex: probate and inheritance tax in the United States is 40%, for individuals).
e) Trusts will not, in principle, affect the annual profit of controlled companies.
f) Companies with operational activities remain subject to taxation upon effective availability.
g) Equity interests and investments of subsidiaries that paid tax in the country of investment may deduct taxes paid abroad from the tax payable in Brazil.
In our opinion, it is too premature to consider any restructuring of interests in controlled companies or exclusive funds, or any measure now to try to minimize the effects of this Provisional Measure.
The most prudent thing is to wait for the approval and/or modification of this MP by the National Congress.
We are attentive to all movement and if there is any change, our team will be prepared and available to propose the best solution for your business.
