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Capital Gain taxation on the
contribution of shares
The Brazilian tax authorities have recently issued a ruling decision (Processo de
Consulta nº 115/06- SRRF 8a. RegiãoFiscal) disclosing the interpretation that a
contribution of shares held by a non-resident investor to a Brazilian company
within the same economic group, is considered a disposition with payment in
kind and as such, would in principle be subject to capital gain taxation.
The capital gain should correspond to the positive difference in Reais between
the amount considered for the contribution of shares and the acquisition cost. In
case it is not possible to prove the cost, the tax base will be the amount
registered with the Brazilian Central Bank or equal to zero.
The capital gain derived from the referred transaction above is subject to the
withholding income tax rate of 15% (or 25% in case of low tax jurisdiction) and
becomes due at the time of the contribution of shares.
The acquirer or the representative (procurador) in Brazil is responsible for
withholding and paying the applicable capital gain tax resulting from the
disposition of the Brazilian shares.
Finally, it should be noted that the ruling is only binding to the specific requester.
However, this may be an indication of the interpretation that the tax authorities
may adopt in the future in similar cases.
For more information, contact
a tax professional in São Paulo:
Marienne S. Munhoz
Tax Partner
+55 (11) 3067-3182
mmunhoz@kpmg.com.br
Luiz R. Dardes
Tax Director
+55 (11) 3067-3188
ldardes@kpmg.com.br
Murilo Mello
Tax Sr. Manager
+55 (11) 3067-3261
murilomello@kpmg.com.br
If you have any questions or
comments or wish to update your
data, propose other professionals or
remove your name from the
distribution list, please send an e-
mail to ict@kpmg.com.br.
International Tax Brazil
TAX
INTERNATIONAL CORPORATE TAX
© 2006 KPMG Tax Advisors - Assessores Tributários Ltda., a Brazilian member firm of KPMG International, a Swiss cooperative.
All rights reserved. Printed in Brazil.
The information contained in International Tax Brazil is general in nature and based on authorities that are subject to change.
Applicability to specific situations is to be determined through consultation with our tax advisors.
The KPMG logo and name are trademarks of KPMG International, a Swiss cooperative.
12 July 25, 2006
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