Interpretative Declaratory Act RFB 03/2016 about the effects of the New Rules on the Capital Gain Taxation
Brazil's Federal Revenue Interpretative Declaratory Act No. 03, of April 27, 2016, was published in the Federal Official Gazette on April 29, 2016. This Act establishes a date for Law No. 13259 / 2016 to take effect (said Law is the result of the conversion of Provisional Executive Order no. 692/2015 into Law), specifically in regard to the Income Tax progressive taxation on capital gains earned by individuals upon the sale of assets and rights of any nature and by legal entities adopting the Simplified Taxation System (SIMPLES) upon the sale of non-current assets.
According to the tax authorities' opinion, Sections 1 and 2 of Law No. 13259 / 2016, which established the progressive taxation above, will take effect on January 1, 2017.
This is so because, although the Law established that the new rules would take effect on January 1, 2016, this would violate the Federal Constitution, according to which (Article 62, par. 2) Provisional Executive Orders enacted for tax increase purposes shall only take effect as from the following year, if they are converted into Law in the same year of their enactment. Since Provisional Executive Order No. 692/2015 was converted into Law No. 13259 only in 2016, the new rules can only take effect as of 2017.
We will be pleased to provide you with any further detail or information you may require in regard to this matter.