20230510-KPMG_Global-Brazil_–_Changes_to_Individual_Taxation,_Reporting_of_Foreign_Income_and_Assets_5页_310kb

Summary of Brazilian Provisional Measure MP No. 1,171/2023 on Personal Income Tax

Effective Immediately (May 1, 2023)

• Changes to personal income tax brackets and rates, with immediate effect upon publishing.
• Introduces options for inflation adjustments on foreign assets and revokes certain existing provisions.
• MP will be converted to law within 60 days, extendable, or it may expire.

Effective From January 1, 2024

• New rules for taxing capital gains from overseas assets, with specific thresholds and rates.
• Taxation of foreign financial investments, subsidiaries' profits, and trust assets at specified rates starting January 1, 2024.
• Changes to trust reporting, where assets are treated as owned by the settlor or beneficiary.
• Repeal of exemptions for capital gains and exchange rate gains on foreign assets.

Key Updates

• Enhanced reporting obligations for tax residents receiving income from abroad.
• Option to update market values of foreign assets held in 2023, with a 10% tax rate on gains.
• Restrictions on the value updates apply to specific assets like jewels, artwork, and certain royalty rights.

Impacts and Compliance

• Increased tax burdens and stricter compliance requirements for tax residents, starting in 2024.
• Businesses and individuals must review tax planning, especially for expatriates and foreign asset holdings to avoid compliance issues.
• Contact KPMG or local authorities for specific guidance.

This summary highlights the main changes from the Provisional Measure and their implications on individual taxation in Brazil.