MBG Advogados



The Law Project no. 4,173/2023 was sent by the federal government to the National Congress for approval of the plenary of the Chamber of Deputies and the Senate.


Taxation of Foreign Financial Investment Earnings: Earnings from foreign financial investments (interest and gains from exchange rate variations on the principal) will be subject to taxation in the annual tax return (or DAA), according to rates ranging from 15% to 22.5%, for the assessment period in which they were effectively received.

Taxation of Capital Gains: Capital gains, including those resulting from exchange rate variations on the principal, will be taxed upon redemption, amortization, sale, maturity, or liquidation of the financial investments.

Taxes Paid abroad: Income tax paid in the country of origin of the earnings can be deducted from the income tax due. Taxes paid abroad that are eligible for reimbursement, refund, compensation, or offset abroad is not allowed to be dedcucted.

Offsetting Losses: Losses from foreign financial investments can be offset against earnings from similar operations during the same assessment period. If losses exceed gains, the excess portion can be offset against profits and dividends from foreign controlled entities, included in the annual tax return (DAA) for the same assessment period. Uncompensated losses at the end of the assessment period can be offset against earnings in subsequent assessment periods.

Exchange Rate Variation on Account Deposits: Exempt if the account is non-interest bearing.


Deferred Taxation for Controlled Entities Abroad: Starting from 01/01/2024, profits of controlled entities abroad (corporations, investment funds, and other corporate forms) will be subject to taxation (progressive tax rates mentioned above) and will be deemed distributed to the Brazilian resident individual on the 31st day of December of each calendar year, regardless of actual distribution.

This rule applies only to foreign controlled entities that meet at least one of the following conditions:

  1. Located in countries or jurisdictions with preferred tax regime; or
  2. passive income is more than 60% of total income (including royalties, interest, dividends, equity interests, rents, financial investments, among others).

Annual Balance Sheet of Controlled Entities Abroad: Profits of controlled entities will (i) be assessed in an annual balance sheet prepared in compliance with Brazilian commercial legislation; (ii) converted into national currency on the last business day of December; (iii) annually taxed and included in the DAA, regardless of actual distribution; (iv) included in the DAA as receivables from the controlled entity abroad, at in Brazilian Reais (and when received, they will not be taxed again, including any exchange rate variation between the taxation date and the receipt date).

Losses: Losses calculated from 01/01/2024 onwards can be offset against profits of foreign controlled entity.

Profits from affiliated companies domiciled in Brazil. Profits of foreign subsidiaries and affiliates may be deducted from the foreign controlled entity’s profits.

Other investments in the Brazil. Income and capital gains from other investments in the Brazil held by the foreign controlled company, which have been taxed by withholding income tax (IRRF) at a rate equal to or greater than 22.5%, may be deducted from the foreign controlled entity´s profits.

Loans to Shareholders Resident in Brazil: Profits of foreign controlled entities abroad are deemed distributed if transferred to the Brazilian resident investor by virtue of a loan transaction.

Exchange Rate Variation of Principal Invested: The exchange rate variation of the principal invested will be included in the individual’s capital gain at the time of sale, redemption or liquidation of the investment. Capital gain shall correspond to the positive difference between the amount received in national currency and the average acquisition cost per share (in Brazilian Reais).

Transfer of Assets to Entities Abroad: Assets and rights transferred at any title by the individual (or by a controlled entity owned by the individual) to another controlled entity should be valued at market value at the time of the transfer, and the difference compared to their acquisition cost will be considered income of the individual subject to taxation by IRPF at the time of the transfer, in which case the tax rate provided for by law will be applied according to the nature of the income

Accumulated Profits until 12/31/2023: For accumulated profits earned until 12/31/2023 will remain being taxed upon actual distribution.

Deduction of Taxes Paid Abroad by the Controlled Entity: Taxes on income due abroad by the foreign controlled entity (“FCE”) and by its non-controlled entities can be deducted. The exchange rate variation of the principal invested in controlled entities abroad will be included in the individual’s capital gain at the time of sale, disposal, reduction or liquidation of the investment.

Declaration of Assets/Portfolio Directly by the Individual: The individual may choose to declare the underlying assets and rights held by the FCE directly. This option shall be irrevocable throughout the term of the investment in the FCE and shall be made at the 2024 DAA. The underlying assets shall be reported individually, at the cost basis to be calculated on the proportion of their value by the total net worth value of the FCE on December 31st, 2023.


Assets and rights subject to a trust arrangement are considered to be of the property of the settlor of the Trust until his/her passing or distribution to beneficiaries. The transfer of ownership of the trust’s assets from the settlor to the beneficiary will be considered a gratuitous transfer, subject to ITCMD starting from 01/01/24.

Information to be provided by the Settlor and Beneficiaries: Settlor and beneficiary must request the trustee to provide the necessary financial information for tax compliance and reporting in Brazil. In addition, the trust deed and/or the letter of wishes shall contain express mention of this obligation.

Taxation Rules:

  • Income and capital gains related to trust assets and rights will be considered earned by the settlor/beneficiaries, as applicable and subjected to Income Tax.
  • If the trust holds a FCE, it will be considered as directly owned by the settlor/beneficiaries, as applicable.
  • Starting on 01/01/24, the transfer of ownership of trust´s assets will be considered a gratuitous transfer, subject to ITCMD.


Foreign assets reported on 12/31/2023 may have their fiscal cost base updated, upon payment of a 10% capital gain tax.

The acquisition cost of assets and rights acquired with income originally earned in foreign currency should be calculated by converting the value of assets and rights from foreign currency to national currency using the closing exchange rate of the foreign currency published for sale by the Central Bank of Brazil on the last business day of December 2023.


The following exemptions shall be revoked as of January 2024:

  1. Exemption from Income Tax on capital gains from the sale of foreign assets acquired as a non-resident; and
  2. Exemption from Income Tax on gains from exchange rate variations in the sale of foreign assets acquired with foreign currency resources.