International Tax Newsletter - Fevereiro 2024

Deadline for delivery of the Declaration of Brazilian Capital Abroad 2024 has begun

Individuals and legal entities resident, domiciled or headquartered in Brazil that have property, rights or assets abroad are required to present the Declaration of Brazilian Capital Abroad (DCBE) with the Central Bank.

There are two forms of declaration: annual and quarterly (valid only in specific cases, detailed below). The annual obligation in 2024 can be delivered from February 15th and has a deadline for transmission on April 5th.

For the purpose of determining whether the declaration is mandatory, only assets with positive values must be considered. However, once the declaration is mandatory, companies with negative net worth must also be informed.

Those who have assets greater than one million US dollars must submit the Declaration of Brazilian Capital Abroad annually, on the base date of December 31, 2023.

Those who have assets greater than one hundred million US dollars on the base dates of March 31, June 30 and September 30 of each base year must complete the quarterly CBE declaration.

For the quarterly declaration referring to the base date of March 31st, the quarterly CBE will be sent from April 30th to June 5th of the same year.

The base date of June 30th has submission deadlines from July 31st to September 5th of the same year.

And the quarterly declaration referring to the base date of September 30th must be submitted from October 31st to December 5th of the same year.

Fines for not declaring or in other cases provided for in the legislation vary from R$2,500.00 to R$250,000.00, which can be increased by 50% in some cases.

Provisional Measure creates the Mover Program to decarbonize Brazilian vehicles

Provisional measure (MP 1,205/2023) published on the penultimate day of 2023 in the Official Gazette of the Union (DOU) establishes the Mover Program (Green Mobility and Innovation), which aims to support the decarbonization of Brazilian vehicles, technological development and global competitiveness. The standard gives tax incentives to companies in the automotive sector that invest in sustainability and provides new obligations for the automotive industry to reduce its environmental impact. 

From February 1, 2024, companies in the sector that produce in Brazil will be able to obtain financial credits to be used to reduce any taxes administered by the Federal Revenue or even be reimbursed in cash. To this end, establishments producing automotive items, strategic solutions for mobility and logistics, or their raw materials and components must spend on research and development or technological production in the country. The program also includes companies that develop, in Brazil, services intended for the automotive chain, with integration into global value chains, and that are intended for recycling in the automotive chain.

In the case of cars and light vehicles, the company must invest more than 0.3% of total gross sales revenue, excluding taxes. For trucks, buses, auto parts and automotive systems, it must be greater than 0.6%. Organizations in Brazil that have designed new products with advanced and sustainable propulsion technologies or embedded systems that enable automated complex decision-making, among other innovations, may benefit even more.

The benefited companies will not be able to accumulate the incentives with those already received in the Manaus Free Trade Zone or through the Rota 2030 Program, created in 2018 with a similar purpose to the Mover Program and revoked by the provisional measure.

Update of the Income Tax table changes profit distribution rules

The update of the Income Tax (IR) table, released last Friday (16) by the Federal Revenue Service, will directly impact the Profit and Results Sharing Program (PLR).

The PLR, which is a means of rewarding workers based on company profits, is a form of non-mandatory bonus. It is often offered by companies in recognition of the good performance and productivity of their employees. This benefit is taxed at source, that is, the tax is deducted directly by the company at the time of payment or credit, separate from other income.

Until then, there was an exemption range established at R$7,407.11, changed for the first time since 2015 in 2023. Now, this exemption range has risen to R$7,640.80, changing the rates and respective deductions. As the tax is withheld at source, it is not necessary for the taxpayer to make a declaration or payment later.

It is worth mentioning that there is an ongoing discussion between the Government and Congress about the equalization of the tax treatment of profits and results of workers to that of partners and shareholders of companies, who are currently entitled to exemption in the distribution of profits or dividends. The Bill (PL 581/2019) which aims to guarantee this exemption, regardless of remuneration, is in the process of being processed in the Chamber of Deputies, after having been approved by the Senate.

Copom reduces Selic Rate in first meeting of the year

The Central Bank of Brazil (BC) unanimously opted for a further reduction in the economy's basic interest rate, driven by the inflationary context. In this decision, the Monetary Policy Committee (Copom) lowered the Selic rate by 0.5 percentage points, setting it at 11.25% per year, a measure widely anticipated by financial market experts.

According to an official statement, the Copom expressed its intention to continue with cuts of 0.5 percentage points in the Selic in the next meetings, with the indication that these reductions could be extended until May. This position was reinforced by the president of the Central Bank, Roberto Campos Neto, during the press conference to present the December Inflation Report.

The Copom statement also highlighted that, if the expected economic scenario is confirmed, further cuts are expected at the next meetings, indicating a pace that they consider appropriate to maintain the contractionary monetary policy necessary for the disinflation process. The decision to stop the cuts will depend on the medium-term economic scenario, as reported by the agency.

Furthermore, the president of the Central Bank, Roberto Campos Neto, confirmed that the minutes released in December would serve as a guide for the first two Copom meetings in 2024. The behavior of inflation, measured by the Broad National Consumer Price Index (IPCA) , also supports this expectation, as it ended 2023 within the target established by the BC.

25 thousand taxpayers did not declare bitcoins in Income Tax. The value exceeds R$1 billion

On February 1st, the Federal Revenue Service of Brazil reported that 25,126 individuals who own bitcoins did not declare the cryptoactive in their 2023 Income Tax Declaration (IR), totaling a value of more than R$1 billion.

According to data from the Tax Authorities, 25,126 individuals would have, at the end of 2022, at least 0.05 bitcoin, corresponding to around R$10,000 in current values. These same individuals, in total, would have invested approximately R$1.06 billion that was not reported to the Revenue.

Furthermore, more than half, exactly 50.9% of the declarants, invested up to R$1,000. Meanwhile, the value of R$10,000 was indicated by 80.6% of individuals.

Based on these data, it was observed that 181 taxpayers indicate that they are abroad and, in this type of situation, depending on the specific conditions, they may be exempt from submitting the declaration here in Brazil.

In order to facilitate the correct completion of the declaration, the IRS will make data on bitcoins and other cryptoactives available in the pre-filled declaration, as happened last year.

In a note, the Brazilian Federal Revenue Service informs that “inspection is evaluating taking action to encourage the self-regularization of data reported last year, encouraging compliance, without imposing fines that are due in the case of opening tax procedures.”