New income tax rates levied on capital gains arising from the sale of assets and rights will only become effective on January 1, 2017

The Brazilian Federal Tax Authority´s Interpretative Declaratory Act No. 3/2016, published in the Official Gazette on April 29^th, 2016, recognized that the new Income Tax rates applicable to capital gains, established by Law No. 13,259 / 2016 will only become effective on January 1^st, 2017, in compliance with the Constitutional Principle of Precedence, according to which the institution of any tax changes will only become effective from the following year of the related provision’s enactment.

Accordingly, throughout the year of 2016, individuals and corporate entities will continue to collect Income Tax on capital gains at the current rate of 15%. However, as from next year onwards, the rate of 15% will be imposed solely on capital gains that do not exceed BRL 5,000,000.00 (five million reais). In turn, the rate of 17.5% will be applied if the gains range from BRL 5,000,000.00 (five million reais) to BRL 10,000,000.00 (ten million reais), and the rate of 20%, from BRL 10,000,000.00 (ten million reais) to BRL 30,000,000.00 (thirty million reais). Finally, the rate of 22.5% will be levied on all capital gains greater than BRL 30,000,000.00 (thirty million reais).¹

Such scenarios can be summarized as follows:

Capital Gains	Up to 12.31.2016	As from 01.01.2017
Below BRL 5,000,000.00	15%	15%
Greater than BRL 5,000,000.00 up to BRL 10,000,000.00		17.5%
Greater than BRL 10,000,000.00 up to BRL 30,000,000.00		20%
Greater than BRL 30,000,000.00		22.5%

[1] The new rates also apply to capital gains incurred by corporate entities when selling their assets and rights registered as non-current assets, except for corporate entities under the actual, presumed or arbitrated profit tax regimes.