Last August 2023, Brazilian Executive Power has presented a legislative proposal (“PL 4173”) regarding the IRPF taxation over the foreign profits earned by Brazilian tax residents shareholders of entities located in “tax heaven countries” (offshores).
This project must be converted into law before the end of 2023 so that it can start producing effects as of the 1st of January 2024.
The project defines as “foreign controlled entities” the companies in which an individual, tax resident in Brazil, and his/her related parties, holds, directly or indirectly, more than 50% of the company shares.
One of the most important aspects of this project is related to the annual taxation of the profits earned by such entities, even though they have not been distributed yet to their shareholders.
The tax rate will be 15% to the annual profits from 6 to 50 thousand BRL and 22,50% for profits over 50 thousand BRL.
In relation to the profits for the FY 2023, the taxation will occur after it effective distribution, however, the project establishes an anticipated taxation of 10% over the differed profits.
The entities that will be subjected to those new rules are the ones whose direct revenue (revenue directly related to the exploitation of an economic activity) are under 60% of their total revenue.