Opinion – Marcia Dessen: Cautions when investing abroad

Technological advances made access to investments abroad possible. In parallel, the challenging political-economic scenario in Brazil leads to increasingly frequent recommendations for diversification with investments abroad.

According to the Central Bank, investments by Brazilians abroad jumped from R$151 million in 2015 to R$204 million in 2020, an increase of 35%. The data are from the Declaration of Brazilian Capital Abroad (CBE), mandatory for Brazilian residents with assets abroad starting at US$ 1 million.

Despite the facilities, investing abroad requires all the analyzes relevant to any investment, such as fitting the investor’s profile, as well as more specific ones, such as the analysis of risk and return considering the economy and legislation of other countries, exchange and tax issues , inheritance etc.

Thus, it is essential to have specialized advice in the country of investments, without losing sight of Brazilian rules.

Attorney Luciana Pantaroto, CFP®, explains that in Brazil, equity and income abroad must be informed in the income tax return, and if applicable, in the CBE and recalls that income abroad is taxable in Brazil, and it is the investor’s responsibility calculate and collect income tax, when due, in the month following receipt.

Dividends and rents abroad, for example, are taxable income according to the progressive table (0 to 27.5%). Capital gains obtained on the sale of assets and rights are subject to exclusive taxation (15 to 22.5%). The gain is exempt if the set of disposals of assets of the same nature is up to R$35,000/month. The limit is R$ 20 thousand/month in the sale of shares in the over-the-counter market.

As these investments can also be taxed in the country of origin, it is important to verify the existence of an agreement to avoid double taxation or reciprocity of tax treatment, which can reduce the tax burden. From the inheritance point of view, although there are laws in some states providing for the collection of ITCMD on inheritances received abroad, the lawyer informs that the STF recently declared this charge unconstitutional until there is a federal complementary law regulating the issue.

Although inheritances abroad are taxed here, Brazil is one of the countries that tax inheritances the least in the world. Currently, the maximum inheritance tax in Brazil is 8%. In the US, the tax can reach 40% and in some European countries there are even higher rates. Furthermore, each country has its own rules for succession.

Thus, tax and succession planning are essential so that the return on investments is not compromised by these costs, in addition to making succession abroad as simple as possible for the heirs.

If the intention is to diversify, it is possible to invest abroad through Brazilian investment funds that invest in assets abroad, or acquire, on the Brazilian stock exchange, shares of ETFs that replicate market indices from other countries, and BDRs, assets backed by shares of companies from other countries.

These investments are taxed in Brazil and transferred to the heirs in accordance with Brazilian succession rules; attractive by the perspective of diversification and, also, by the lesser tax and succession complexity, reducing costs and headaches for the investor and their heirs.