Income Tax in Brazil

23 Aug

Income Taxes (IT)

  To finish this series of four articles in partnership with Maestri Investment Group LTD., we need to address a very important subject that we hope will be present in your life going forward, as little as possible, but still present.

First, let's start by introducing the Income Tax itself, and then delve a little deeper into the peculiarities of the IT for investors in general.

So let's conceptualize this very important issue, the Income Tax can be defined basically as the tax on earnings, both on individuals and on companies. It is calculated taking into account earnings such as salaries, lottery prizes and investments, duly declared within a period of 12 months. But, in the case of individuals, the tax can be an optional declaration for those who do not have a certain minimum annual income, which today is R$ 28,559.70, or if they have a total of assets less than R$ 300,000.

  

The purpose of income tax collection is to finance government projects such as health, infrastructure, among many others, in addition to government programs such as Bolsa Família, so you may have already imagined that the collection of money is big and important for the Government Federal keep your projects.

  

But let's focus on our subjects and address Income Tax aimed at investors.

IT and Investments

It is interesting that you know what these investments are so that you can take appropriate steps to pay less or even not need to pay. And when we talk about investment, some have peculiarities and characteristics that are different from others, so let's simplify your experience with the subject a little.

  Of course, wealthier investors usually have accounting agencies that do this kind of work for them, due to the size of their assets or even lack of experience with this type of activity. To be clear, we're not going to teach you how to file your income tax, but we're going to direct you to which investments pay and which are exempt from income tax.

Investment Funds

Investment funds among themselves have some differences when we talk about income taxation:

STOCK INVESTMENT FUNDS

These types of assets are more simplified, as they have a fixed rate of 15% on gross income, deducted only when these amounts are withdrawn.

  For example, if you have a stock fund and you redeem income of around R$100,000 at the fund's maturity or in advance, you will pay an amount of, on average, R$15,000 on the gross withdrawal amount, regardless of how long it was in possession of this asset.

LONG TERM FUNDS

These are funds with a longer maturity, usually over 1 year. The rates for this type of asset vary in relation to the investment's custody time, which are 15% for investments with redemption in a period greater than 720 days, 17.5% for investments redeemed between 361 and 720 days, 20% for redeemed between 181 and 360 days, and 22.5% for investments redeemed in less than 180 days.

SHORT TERM FUNDS

 As you can already imagine, these are funds that have shorter maturity dates, usually up to 1 year. These funds, as well as long-term funds, are dependent on the time the asset was in their custody, with the minimum rate being 20% for investments redeemed after 180 days, and the maximum being 22, 5% for investments redeemed within 180 days.

  For example, if you redeemed a short-term fund with a gross income of BRL 100,000 in 177 days, you will pay an amount of approximately BRL 22,500 on that gross amount, but if you waited a little while and redeemed in 182 days , the rate is lower and you will pay more or less R$20,000, not considering the fund's appreciation in these 5 days of difference.

REAL ESTATE FUNDS

For these applications, redemptions are taxed at an average of 20% of the gross income withdrawn, so if you sell a real estate fund in the total amount of R$100,000, you will declare around R$20,000 in Income Tax.

  But, there is a catch, these funds distribute monthly dividends, which are tax free nowadays.

INVESTMENTS IN FIXED INCOME SECURITIES

Fixed income securities basically follow the regressive table for deducting income tax, which consider the rates and terms exactly the same as those of a long-term investment fund, ranging from 15% for redemptions after 720 days, and 22.5 % for redemptions made before 180 days. Examples of fixed income securities are Tesouro Direto and CDBs.

Investments in Variable Income

STOCKS

  Stock investments also have some peculiarities in their different assets. Let's leave brokerage, custody, and settlement fees aside and focus only on income tax on these assets.

  To talk about this, we will divide into two parts, the operations known as normal (trades that are not carried out on the same day), and the day trade operations (daily trades).

  For normal operations, there is an exemption from the IR for redemptions worth less than R$20,000 per month, but for those who sell more than this amount per month, the rate paid is around 15%. This collection is made by the Federal Revenue through a guide known as DARF.

  Two points that we think are important to emphasize, the first is that, currently, dividends received by shares are tax exempt, and the second point is that the losses can be compensated in the following month, for example, if there was a loss of R$ 10,500 shares, may sell up to R$ 30,500 next month with exemption.

  Daily operations are much simpler, they have a fixed 20% rate on the yield with these types of applications. Despite following the same principle of losses as normal operations, these operations do not have an exemption value.

OPTIONS MARKET

These investments follow the same principle as investments in stocks but have a peculiarity in which there is a kind of “operation expense rate” where 0.005% is withheld at source for normal operations and 1% in Day Trade.

INVESTMENTS ABROAD

  If you have investments outside Brazil, be aware that these types of investments are usually taxed for transactions greater than R$100,000, remembering that “it is necessary to render accounts to the Central Bank” (Magnetis, 2020). These investments usually have a 15% tax rate on gross income, however, there are countries in which Brazil has partnerships that offer certain “tax incentives”, such as Germany and the United States.

INVESTMENTS THAT DON'T PAY IT

Most investments are eligible for tax return, but some are exempt from income tax, such as income from the Savings Account, Real Estate Credit Bills ("LCIs"), Agribusiness Credit Bills ("LCAs"), Debentures and dividends taken from real estate funds and stocks.

  But just because they are exempt does not mean that they do not need to be declared, remember that the IT is a declaration of total annual income, that is, everything relevant to the income must be declared, including family expenses, health, among others.

Maestri Investment Group LTD has excellent investment options abroad that follow a fixed rate of 15% on its income, both for medium and long term. Visit www.investmaestri.com and learn more!

One more important thing, evading taxes is a crime, so if you want to not pay or pay less taxes, choose investments that are exempt from income tax. When declaring, talk to an accountant and clear all your doubts before making any decision.

CONCLUSION

Given the pretext that the more you earn, the more income tax you pay, earn enough to pay a lot of Income Tax, but of course, the more information you have about tax-free investments, you'll likely look for ways to get exemption in the specialization of its assets.

Remembering that, if you are making your portfolio thinking about income tax exemption, be aware of the new tax reform that seems to promise an increase in taxation for some specifics that we have already mentioned above.

And with that, we end our series of Basic Investments in partnership with Maestri Investment Group LTD., We hope that you have enlightened and, above all, that I encourage you to start your investment journey and let go of fear and immediacy.


Good investments!

Extra material:

Explanatory video of how to declare your investments: https://www.youtube.com/watch?v=eZV-4MQ_bys

Sources:

Tudo sobre Imposto de Renda (IR) 2020: o que é, como funciona e como declarar. BTG Pactual. Disponível em: https://www.btgpactualdigital.com/blog/imposto/tudo-sobre-imposto-de-renda. Acesso em: 19/02/2020.

Afinal para onde vão os impostos que pagamos. Finanças Pessoais. Disponível em: https://financaspessoais.organizze.com.br/afinal-para-onde-vao-os-impostos-que-pagamos/. Acesso em: 19/02/2020.

Imposto de Renda Sobre Investimentos: Como Declara Suas Aplicações. Blog Rico Investimentos. Disponível em: https://blog.rico.com.vc/imposto-renda-investimentos. Acesso em: 20/02/2020.

Tributação de Investimentos: Tudo dobre IR, IOF e outros impostos. Blog Magnetis. Disponível em: https://blog.magnetis.com.br/tributacao-em-investimentos-ir-iof/amp/. Acesso em: 20/02/2020.

Guest User