Brazilian Federal Revenue Office clarifies tax treatment applicable to foreign investors

The Federal Revenue Office of Brazil published in today’s Federal Official Gazette Interpretive Declaratory Act No. 5 (“ADI 5/19”), which states that the origin of the investment, for the purposes of applying the special tax regime applicable to foreign investors not domiciled in a tax haven in the Brazilian financial and capital markets, will be determined based on the jurisdiction of the direct investor in the country.

Thus, it is clear that the jurisdiction in which the final beneficiary of the investment is domiciled should not impact the tax treatment to be given to the foreign investor. ADI 5/19 further clarifies that cases of intent, fraud or simulation will be dealt with exceptionally.

The ADI 5/19 edition is a breakthrough and brings more legal certainty to foreign investors who invest in the Brazilian financial and capital markets.

Demarest’s Tax team is available to clarify any doubts or questions related to this topic.