de Ca alho Junio , Ped o Humbe o B uno
Wo king Pape
Taxa ion o sa ings ehicles in B azil and a p oposal o a
" op-up" income ax
Tex o pa a Discussão, No. 3103
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Sugges ed Ci a ion: de Ca alho Junio , Ped o Humbe o B uno (2025) : Taxa ion o sa ings ehicles
in B azil and a p oposal o a " op-up" income ax, Tex o pa a Discussão, No. 3103, Ins i u o de
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3103
TAXATION OF SAVINGS VEHICLES IN
BRAZIL AND A PROPOSAL OF A
“TOP-UP” INCOME TAX
PEDRO HUMBERTO BRUNO DE CARVALHO JUNIORPEDRO HUMBERTO BRUNO DE CARVALHO JUNIOR
3103
B asilia, Ap il 2025
TAXATION OF SAVINGS VEHICLES IN
BRAZIL AND A PROPOSAL OF A
“TOP-UP” INCOME TAX
PEDRO HUMBERTO BRUNO DE CARVALHO JUNIOR1
1. Tenu ed Resea che a Depa men o Mac oeconomic S udies and Policies o he Ins i-
u e o Applied Economic Resea ch (Dimac/Ipea). E-mail: [email p o ec ed] .b .
Discussion Pape
A publica ion o dissemina e he indings o esea ch di ec ly o
indi ec ly conduc ed by he Ins i u e o Applied Economic Resea ch
(Ipea). Due o hei ele ance, hey p o ide in o ma ion o specialis s
and encou age con ibu ions.
© Ins i u e o Applied Economic Resea ch – ipea 2025
C331 Ca alho Junio , Ped o Humbe o B uno de Taxa ion o
sa ings ehicles in B azil and a p oposal o a “ op-up”
income ax / Ped o Humbe o B uno de Ca alho Junio . –
B asilia : Ipea, Ab . 2025.
47 p. : il. – (Discussion Pape ; n. 3103).
Inclui e e ências bibliog á icas.
1. Ganhos de Capi al. 2. Impos o de Renda da Pessoa
Física. 3. Concen ação da Riqueza. 4. Ap endizado. 5. Impos o
sob e He anças. 6. B asil. I. Ins i u o de Pesquisa Econômica
Aplicada II. Tí ulo.
CDD 336.24
Ficha ca alog á ica elabo ada po Elisangela da Sil a Gomes de Macedo CRB-1/1670
How o ci e:
CARVALHO JUNIOR, Ped o Humbe o B uno de. Taxa ion o sa-
ings ehicles in B azil and a p oposal o a “ op-up” income ax.
B asília: Ipea, Ab ., 2025. 47 p.: il. (Discussion Pape , n. 3103). DOI:
h p://dx.doi.o g/10.38116/ d3103-eng
JEL: H24; H27; H29; H71; K34; K36.
DOI: h ps://dx.doi.o g/10.38116/ d3103-eng
Ipea publica ions a e a ailable o ee download in PDF (all) and
ePUB (books and pe iodicals).
Access: h ps://www.ipea.go .b /po al/publicacoes
The opinions exp essed in his publica ion a e o exclusi e
esponsibili y o he au ho s, no necessa ily exp essing he o icial
iews o he Ins i u e o Applied Economic Resea ch and he
Minis y o Planning and Budge .
Rep oduc ion o his ex and he da a con ained wi hin is allowed
as long as he sou ce is ci ed. Rep oduc ion o comme cial
pu poses is p ohibi ed.
Fede al Go e nmen o B azil
Minis y o Planning and Budge
O ice Simone Nassa Tebe
A public ounda ion a ilia ed o he Minis y o
Planning and Budge , Ipea p o ides echnical and
ins i u ional suppo o go e nmen ac ions –
enabling he o mula ion o nume ous public
policies and p og ams o B azilian de elopmen –
and makes esea ch and s udies conduc ed by i s
s a a ailable o socie y.
P esiden
LUCIANA MENDES SANTOS SERVO
Di ec o o Ins i u ional De elopmen
FERNANDO GAIGER SILVEIRA
Di ec o o S udies and Policies o he S a e,
Ins i u ions and Democ acy
LUSENI MARIA CORDEIRO DE AQUINO
Di ec o o Mac oeconomic S udies and Policies
CLÁUDIO ROBERTO AMITRANO
Di ec o o Regional, U ban and En i onmen al
S udies and Policies
ARISTIDES MONTEIRO NETO
Di ec o o Sec o al S udies and Policies,
o Inno a ion, Regula ion and In as uc u e
FERNANDA DE NEGRI
Di ec o o Social S udies and Policies
RAFAEL GUERREIRO OSÓRIO
Di ec o o In e na ional S udies
KEITI DA ROCHA GOMES
Chie o S a
ALEXANDRE DOS SANTOS CUNHA
Gene al Coo dina o o P ess and
Social Communica ion
GISELE AMARAL DE SOUZA
Ombudsman: h ps://www.ipea.go .b /Ou ido ia
URL: h ps://www.ipea.go .b
CONTENTS
ABSTRACT
SINOPSE
1 INTRODUCTION ........................................................................ 6
2 TAXATION OF SAVINGS VEHICLES IN BRAZIL .................. 7
2.1 Open-ended ixed-income unds and bonds ..............................7
2.2 Real es a e ................................................................................. 10
2.3 Pension und ............................................................................. 12
2.4 P i a e closed-end unds and o sho e us s......................... 13
2.5 Real es a e and ag icul u al unds and bonds ....................... 15
2.6 Equi y unds and sha es ........................................................... 16
2.7 P i a e equi y and en u e capi al unds ................................ 18
3 EFFECTIVE TAX RATES ON SAVINGS VEHICLES
IN BRAZIL ...............................................................................19
3.1 Summa izing ax ules on sa ings ehicles in B azil .............. 19
3.2 Calcula ing ma ginal ETR ......................................................... 22
3.3 E ec i e ax a es among some OECD coun ies ................... 28
4 REVENUES OUTCOMES OF THE TAX REFORMS
ON FUNDS ..............................................................................29
5 PROPOSALS TO REDUCE REGRESSIVITY: A TOP-UP
INCOME TAX .........................................................................32
5.1 Tax a oidance ela ed o esidence s a us ..................................32
5.2 Th ee app oaches ha can e ec i ely ax weal hy B azilians 33
5.3 Designing a TUIIT o B azil ...................................................... 35
5.4 Needed changes on he cu en income ax ........................... 41
6 CONCLUSION ........................................................................42
REFERENCES ............................................................................ 45
ABSTRACT
The s udy examines he shi in axa ion o open-ended ixed-income unds in B azil
om a ealiza ion basis o an acc ual basis (locally known as come-co as), which was
in oduced in 1998 and mo e ecen ly ex ended o include p i a e closed-end unds and
o sho e us s h ough he enac men o Law No. 14,754/2023. The s udy es ima ed
he e ec i e ax a es o a ious sa ings ehicles, including eal es a e, ixed-income
unds and bonds, s ocks, pension unds, eal es a e and ag icul u al unds, and en u e
capi al unds, among o he s. I inds ha indi idual in es men s in en al p ope ies a e
subjec o a highe e ec i e ax a e compa ed o o he in es men ehicles, especially
inancial asse s. Finally, he s udy p oposes a 14% “ op-up” Indi idual Income Tax aimed
a educing o e all ax eg essi i y om income ax and social con ibu ions o he op
2% o weal hies axpaye s. This minimum ax would encompass all sou ces o income,
including di idends, ce ain un ealized capi al gains, and bene i s cu en ly exemp by
legisla ion, po en ially gene a ing a maximum o R$ 145.6 billion in e enue.
Keywo ds: capi al gains; indi idual income ax; weal h concen a ion; inhe i ance ax; B azil.
SINOPSE
O ex o a a da mudança pa a ibu ação eco en e ou an ecipada dos undos abe os
de enda ixa (sis ema popula men e conhecido como come-co as) in oduzido em 1998,
e mais ecen emen e pe an e os undos pessoais echados e as us s localizadas no
ex e io a a és da Lei no 14.754/2023. A a és de simulações, o abalho compa ou a
ibu ação e e i a de di e sos eículos de in es imen os, como imó eis, undos e le as
de enda ixa, ações, undos de pensão, undos imobiliá ios e do ag onegócio, undos
de pa icipação, en e ou os. Es imou-se uma al a ibu ação do in es imen o indi idual
em imó eis pa a aluguel em de imen o de ou os eículos de in es imen o, sob e udo
in es imen os inancei os. Po im, o es udo az uma p opos a pa a eduzi a eg es-
si idade da ibu ação conjun a do impos o de enda e con ibuições p e idenciá ias
pe an e os 2% mais icos, in oduzindo uma ibu ação mínima de 14% sob e a enda
o al do con ibuin e, incluindo di idendos, ce os ganhos de capi al não ealizados
e bene ícios a ualmen e isen os pela legislação. Com isso, es imou-se um po encial
máximo de R$ 145,6 bilhões em ganhos de ecei a.
Pala as-cha e: ganhos de capi al; impos o de enda da pessoa ísica; concen ação
da iqueza; impos o sob e he anças; B asil.
6
DISCUSSION PAPER
3103
1 INTRODUCTION
This s udy examines he ecen changes in B azil’s income ax legisla ion esul ing
om he enac men o Fede al Law No. 14,754/2023 (B asil, 2023b), which in oduced
acc ual basis axa ion o wo ypes o unds p ima ily held by weal hy indi iduals:
p i a e closed-end unds and o sho e us s. Addi ionally, his s udy p o ides an o e -
iew o he axa ion o o he sa ings ehicles in B azil, analyzes he e enue ou comes
esul ing om he new law, discusses income ax eg essi i y on he weal hies ci izens,
and p oposes measu es o mi iga e his issue. Many s udies ha e indica ed ha he
e ec i e income ax a e on he op 0.1% o ea ne s has emained app oxima ely 2%
o se e al yea s (Gobe i, 2024; Gobe i and O ai , 2016; In oíni e al., 2018), wi h he
cu en exemp ion o di idend income ci ed as a p ima y ac o con ibu ing o his
scena io. Howe e , e en wi h a possible ein oduc ion o di idend axa ion in B azil,
i is expec ed ha weal hy indi iduals will exploi o he exis ing loopholes wi hin he
ax sys em. Thus, unde s anding he axa ion o o he sa ings ehicles is essen ial o
o mula e ax policies o e ec i ely ax he op iches .
Fu he mo e, his s udy analyzes no only he axa ion o capi al income and gains
bu also he applicable axes on capi al holding and hei ans e h ough sale, dona-
ion, o inhe i ance ac oss a ious sa ings ehicles. Since income ax exemp ions and
educ ions a e applied o each income ca ego y sepa a ely a he han conside ing he
o e all income o he axpaye , he s udy highligh s ax eg essi i y among he weal-
hies indi iduals and p oposes a “ op-up” income ax ha a ge s all sou ces o income,
including hose cu en ly exemp ed o he iches indi iduals.
The signi icance o his pape a ises om he global end o low capi al axa ion, which
ends o a o weal hy indi iduals. These indi iduals o en exploi loopholes in bo h local and
in e na ional legisla ion o minimize hei ax liabili ies o engage in agg essi e ax planning.
B azil’s 2023 e o m conce ning unds axa ion aims o add ess one o he exis ing loopho-
les in he coun y’s ax amewo k. This s udy akes inspi a ion om a ious publica ions,
including wo ks by Hebous e al. (2024), OECD (2018; 2022a), and Zucman (2024).
The s udy is s uc u ed in o six sec ions, besides his in oduc ion and conclusion. The
second sec ions de ail he cu en axa ion amewo k ac oss se en ypes o sa ings ehi-
cles in B azil: i) open-ended ixed-income unds and bonds; ii) eal es a e; iii) pension unds;
i ) p i a e closed-end unds and o sho e us s ( hose a ec ed by Law No. 14,754/2023);
) eal es a e and ag icul u al unds and bonds; i) equi y unds and s ocks; and ii) p i a e
equi y and en u e capi al unds. Sec ion h ee ou lines he e ec i e axa ion le els associa-
ed wi h hese se en sa ings ehicles, unde sco ing he signi ican bu den imposed on en al
eal es a e held by indi iduals, as p e iously demons a ed by OECD (2022a). Sec ion ou
e iews B azil’s capi al gains ax e enues since 1998, highligh ing he e enue implica ions
7
DISCUSSION PAPER
DISCUSSION PAPER
3103
o Law 14,754/2023. Las ly, sec ion i e p oposes a 14% “ op-up” income ax o he op
2% weal hies axpaye s o alle ia e he disp opo iona e ax eg essi i y s emming om
ex ensi e capi al income exemp ions and exis ing loopholes in ax legisla ion.
2 TAXATION OF SAVINGS VEHICLES IN BRAZIL
This sec ion p o ides a his o ical o e iew and analyzes he ax ules o he se en
sa ings ehicles in B azil: i) open-ended ixed-income unds, and go e nmen o co po-
a e bonds; ii) eal es a e; iii) pension unds; i ) p i a e closed-end unds; ) incen i ized
unds and bonds o he eal es a e and ag icul u al sec o s; i) equi y unds and s ocks;
and ii) incen i ized p i a e equi y and en u e capi al unds. The analysis co e s he
exis ing axes and hei egula ions ha may apply a all s ages o capi al holding:
acquisi ion, owne ship, income app op ia ion, ansmission ia inhe i ance o dona ion,
and disposal h ough sale. Addi ionally, his sec ion dis inguishes he ules applicable
o esiden s and non- esiden s and p o ides a b ie o e iew o he ax ules applied o
ce ain sa ings ehicles among some OECD coun ies.
2.1 Open-ended ixed-income unds and bonds
2.1.1 Capi al income and gains o esiden s
In B azil, he acc ual-based axa ion o open-ended ixed-income unds ( undos de enda
ixa)1 held by esiden s was in oduced in 1998 h ough P o isional Execu i e O de
(Medida P o isó ia – MP) No. 1,636/1997.2 This change occu ed du ing a inancial
c isis igge ed by he Asian c isis, which pu p essu e on B azil’s pegged exchange a e
and caused he p ime in e es a e ( axa Selic) o ise o 45.9% in No embe 1997.3 MP
No. 1,636/1997 es ablished Decembe 31, 1997, as he e ec i e da e o implemen -
ing acc ual axa ion, allowing income acc ued be o e his da e o con inue being axed
upon ealiza ion. Addi ionally, he ax a e was aised om 15% o 20%, while he same
law educed he ax a e o equi y unds ( undos de enda a iá el)4 om 15% o 10%
o encou age in es men in he domes ic s ock ma ke .
1. In B azil, ixed-income unds, which include mo e han 33% o ixed-income asse s (such as go e n-
men and co po a e bonds, secu i ies, ce i ica es o deposi , and gold), a e akin o money-ma ke unds
( undos de enda ixa) and mu ual unds ( undos mul ime cado).
2. This p o isional execu i e o de was annually enewed up o become de ini i e wi h he MP No. 2,189-49/2001.
3. B azil’s annual p ime a e (Tax Selic) inc eased om 19.0% o 45.9% in No embe 1997 due o e ec s
o Asian c isis, dec eased o 19.3% in July 1998, and inc eased again o 40.2% in Sep embe 1998 due o
Russian c isis.
4 . They mus be composed o a leas 67% equi ies, sha es, s ocks, asse -backed secu i ies, op ions, o -
wa ds, u u es con ac s, o o he secu i ies aded on he B azilian S ock Exchange (Bo espa).
8
DISCUSSION PAPER
3103
Du ing he inancial c isis o he 1990s, uppe -middle-class and weal hy indi iduals
bene i ed om high in e es a es on ixed-income unds, allowing hem o accumula e
weal h, which exace ba ed inequali y. The e o e, implemen ing acc ual basis axa ion on
capi al gains aimed o mi iga e his end (Hebous e al., 2024). The ansi ion om ealiza-
ion o acc ual basis o his common sa ings ehicle was popula ly known as come-co as
( ansla ed as “sha es ea e ”). Howe e , MP No. 1,636/1997
5
modi ied Law No. 9,532/1997
o exclude closed-ended unds om ecei ing he same ax ea men as open-ended unds,
meaning he o me con inued o be axed upon o ealiza ion. The subsequen RFB eg-
ula o y ins uc ions (ins ução no ma i a – IN) u he cla i ied ha p i a e closed-ended
unds would be axed upon ealiza ion acco ding o he s anda d capi al gains schedule.
Addi ionally, o ax esiden s, he income om o sho e us s was also subjec o axa ion
upon i s edemp ion in B azil.
In 2002, he B azilian go e nmen launched a p og am o issue go e nmen bonds
ha indi iduals could hold di ec ly, named as Tesou o Di e o. These bonds a e no sub-
jec o ecu en axa ion unde he come-co as egime; ins ead, income ax is applied o
acc ued income upon ea ly sale in he seconda y ma ke o a inal ma u i y. Cu en ly,
he ma u i y o Tesou o Di e o ypically anges om 3 o 30 yea s, some paying semes al
in e es s and allowing o de e axa ion. The e o e, di ec in es men s in bonds ha e
g own mo e signi ican ly han hose in ixed-income unds.
Laws No. 10,892/2004 and No. 11,033/2004 modi ied he come-co as amewo k,
in oducing biannual ax collec ion o ixed-income unds and es ablishing long- e m
a es o bo h ixed-income unds and ixed-income bonds. Long- e m ixed-income
unds held by esiden s ha e been axed biannually a 15% unde come-co as, bu highe
a es apply o edemp ions made wi hin wo yea s.
6
Sho - e m ixed-income unds a e
axed biannually a 20% unde come-co as and incu a highe a e o 22.5% i edeemed
wi hin six mon hs. This long- e m axa ion on edemp ion is deduc ible om wha was
collec ed by come-co as. Fixed-income bonds, such as Tesou o Di e o and co po a e
bonds, a e subjec o he same long- e m a es; howe e , hey con inue o be axed upon
sale in he seconda y ma ke o a hei inal ma u i y.
Mo eo e , Law No. 11,033/2004
7
con i med ha o he unds axed on a ealiza ion
basis would emain subjec o his ule. This includes all unds no classi ied as open-ended
ixed-income o mu ual unds, encompassing p i a e closed-end unds ( undos echados),
p i a e pension unds, equi y unds ( undos de in es imen o em ações – FIA), p i a e equi y
5. I em II, a . 6, MP No. 1,636/1997.
6. These inc eased a es a e 22.5% o edemp ions made wi hin six mon hs, 20% o hose be ween six
mon hs and one yea , and 17.5% o edemp ions be ween one and wo yea s.
7. Pa ag aph 3, a . 1, Fede al Law No. 11,033/2004.
15
DISCUSSION PAPER
DISCUSSION PAPER
3103
annual dis ibu ions (in Ko ea). Acco ding o hese ules, hese six coun ies likely apply
he same ax ea men o bo h open-ended and closed-end unds.
Ten coun ies (Aus ia, Czechia, Denma k, Ge many, La ia, he Ne he lands, New
Zealand, Po ugal, Sweden, and Tu key) conside ed unds as opaque s uc u es and
applied a inal wi hholding ax on acc ued income. In con as , eigh een coun ies axed
acc ued income on unds only upon ealiza ion, ei he as in e es , di idends, o capi al
gains, depending on he und and he na u e o he e u n.
Capi al gains ax on he sale o und sha es was imposed in all coun ies excep
Aus alia (which al eady axes und e u ns on an acc ual basis), as well as in he Ne he -
lands, New Zealand, and Po ugal (which apply a inal wi hholding ax on und e u ns on
an acc ual basis). In con as , Belgium and Colombia ully exemp unds om axa ion
on bo h acc ued income and capi al gains. Fu he mo e, no coun y imposes ansac ion
axes on in es men unds.
2.5 Real es a e and ag icul u al unds and bonds
Real es a e in es men unds (FII) a e closed-end unds wi h ixed o inde e mina e sha-
es ha ocus on he eal es a e sec o . They we e es ablished by Law No. 8,668/1993
and a e u he egula ed by Comissão de Valo es Mobiliá ios (CVM) Ins uc ions No.
472/2008 and No. 175/2022 (Annexu e III). FIIs mus in es in p ope ies in ended o
en al, cons uc ion, o esale, as well as in sha es o cons uc ion companies. They ypi-
cally do no equi e a high minimum in es men le el and annual ees ange om 1% o
2% o he in es ed capi al. Fo eign in es o s, e en hose esiding in low- ax ju isdic ions,
a e exemp om capi al gains ax. By 2024, nea ly 500 egis e ed FIIs we e aded on
Bo espa, making hem a popula sa ings ehicle among B azilians, as hey gene ally
o e mon hly ax- ee di idends o indi iduals.
Ag icul u al in es men unds (Fiag o) ha e ules simila o hose o FII. They
we e es ablished by Law No. 14,130/2021, which inco po a ed Fiag os unde Law No.
8,668/1993. Fiag os can be ei he open-ended o closed-ended unds linked o he ag i-
business sec o . They in es in a ious asse s ela ed o ag ibusiness, such as c edi
igh s, u al p ope ies, secu i ies, and ela ed sha es. They o e ax- ee di idends o
indi iduals, and he e is no p ede e mined ime o edemp ion; howe e , sha eholde s
can sell hei sha es on he seconda y s ock ma ke , Bo espa. Fo eign in es o s, inclu-
ding hose esiding in low- ax ju isdic ions, a e exemp om capi al gains ax. By 2024,
nea ly hund ed egis e ed Fiag os we e lis ed on Bo espa, making hem a popula sa ings
ehicle among B azilians due o he absence o come-co as and he egula dis ibu ion
o ax- ee di idends.
16
DISCUSSION PAPER
3103
In addi ion, eal es a e bonds such as ce i ica es o eal es a e ecei ables (ce i i-
cado de ecebí eis imobiliá ios – CRI) and le e s o c edi o eal es a e (le a de c édi o
imobiliá io – LCI) and ag icul u al bonds such as ce i ica es o ag icul u al ecei ables
(ce i icado de ecebí eis do ag onegócio – CRA) and ag icul u al c edi le e s (le a de
c édi o do ag onegócio – LCA) a e also sec o -speci ic in es men s. LCIs a e ixed-in-
come secu i ies issued by inancial ins i u ions o und eal es a e companies, while CRIs
a e mo gage-backed secu i ies issued by secu i iza ion i ms. LCAs a e ixed-income
secu i ies issued by inancial ins i u ions, backed by c edi igh s om he ag icul u al
sec o , whe eas CRAs a e speci ically designed o ag icul u al inancing. These bonds
a e conside ed mo e conse a i e in es men s, wi h e u ns ypically sligh ly lowe han
he Selic in e es a e; howe e , hey a e income ax exemp .
2.5.1 Capi al income and gains
Di idends egula ly dis ibu ed by FIIs and Fiag os a e ax- ee o indi idual esiden s
and non esiden s, e en i hey eside in low- ax ju isdic ions. Howe e , capi al gains due
o sha es’ sale in he seconda y ma ke a e axed a 20%. FIIs a e e y low- axed. A a
co po a e le el, unds income (mos ly p ope y en s) and capi al gains (due o esale
o p ope ies) a e also ax exemp ed.11 While local p ope y axes and s amp du ies s ill
apply o p ope ies owned by FIIs, hey a e gene ally low, s amp du ies a 3% and an
e ec i e u ban p ope y ax a e o 0.4%. Fiag os also ha e sligh ly he same ax ules
as FIIs a he co po a e le el, which income and capi al gains a e ax exemp ed. As a
esul , only capi al gains om he esale o sha es by sha eholde s in he seconda y
ma ke a e e ec i ely axed.
2.5.2 Capi al ans e ence by sale, dona ion o dea h
Inhe i ance ax le ied by s a e go e nmen s o FIIs, Fiag os, and eal es a e bonds and
ag icul u al bonds ha e he same ules as o he asse s.
2.6 Equi y unds and sha es
This sec ion ou lines he axa ion o equi y unds (FIA), and secu i ies (s ocks, sha es,
B azilian Deposi a y Receip s – BDR) di ec ly held by indi iduals and companies a-
ded on Bo espa. FIAs a e open-ended o closed-end unds wi h a leas 67% o hei
capi al comp ised o secu i ies, while ixed-income in es men s may ep esen up o
11. A . 16, Law No. 8,668/1996.
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3103
33%. Al hough FIAs canno dis ibu e egula di idends, hei sha es can be edeemed
(i hey a e open-ended unds) o aded on a seconda y ma ke . BDRs allow in es o s
in B azil o indi ec ly own sha es o o eign companies wi hou engaging wi h o eign
b oke ages. BDRs a e issued by o eign companies h ough a B azilian deposi o y ins i-
u ion and can be aded on Bo espa. Howe e , he ax ules o BDRs di e om hose
o B azilian s ocks and equi y unds.
2.6.1 Capi al income and gains
Di idends ecei ed om di ec owne ship o sha es and s ocks a e ax- ee, while income
om in e es on ne equi y (ju os sob e o capi al p óp io) is axed a 15%. Howe e , since
2015, acc ued di idends on FIAs ha e been axed a 15% upon ealiza ion, acco ding o he
in e p e a ion o IN No. 1,585/2015 (B asil, 2015). P io o 2015, hese acc ued di idends on
FIAs we e exemp . Addi ionally, di idends om BDRs a e conside ed o sho e income and a e
axed acco ding o he s anda d p og essi e income ax schedule, which can go up o 27.5%.
Capi al gains o FIAs and s ocks a e axed on ealiza ion a 15% o esiden s and
10% o non esiden s. Howe e , capi al gains om day- ade ope a ions in he s ock
ma ke a e axed a a a e o 20%, and small capi al gains up o R$ 20,000 pe yea a e
exemp . Speci ic long- e m equi y unds held by non esiden s (no loca ed in low- ax
ju isdic ions)12 a e capi al gains exemp ed unde ce ain condi ions. They mus ha e
100% o hei sha es held by non esiden s, and hei capi al mus comp ise a leas 85%
o s ocks, equi ies o o he ela ed secu i ies.
13
Capi al gains om BDRs a e ea ed
he same as hose om B azilian equi ies and a e axed a 15% (o 20% o day- ade
ansac ions). Howe e , he e is no elie o low- alue capi al gains.
2.6.2 Capi al ans e ence by sale, dona ion o dea h
Inhe i ance ax le ied by s a e go e nmen s on FIAs, s ocks, BDRs and o he ela ed
ehicles ha e he same ules as o he asse s.
2.6.3 Taxa ion o sha es among OECD coun ies
Acco ding o he OECD (2018, p. 30), as o July 2016, di idends om equi ies we e axed
unde ei he a la - a e capi al income ax o a b oadly comp ehensi e income ax. The
12. The coun ies conside ed low- ax ju isdic ions a e hose in he 1s a icle o he RFB IN No. 1,037/2010,
a ailable a : h p://no mas. ecei a. azenda.go .b /siju 2consul a/link.ac ion?idA o=16002 (in Po uguese).
13. RFB IN No. 1,585/2015, a . 91, 6 h pa ., II.
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3103
la e model was applied in Aus alia, Canada, Chile, Finland, F ance, Hunga y, I eland,
Japan, Ko ea, Luxembou g, Mexico, New Zealand, No way, Spain, Swi ze land, he Uni-
ed Kingdom, and he Uni ed S a es. Only Es onia exemp ed di idends. Capi al gains on
equi ies we e axed upon ealiza ion in 31 ou o 36 coun ies, while being exemp ed in
Belgium, Colombia, he Ne he lands, New Zealand, and Tu key. The e was no axa ion
on un ealized capi al gains om sha es. Addi ionally, s amp du ies on sha e pu chases
o sales we e applicable in Belgium, I eland, I aly, and G eece.
2.7 P i a e equi y and en u e capi al unds
P i a e Equi y In es men Funds (FIP) a e incen i ized closed-end unds. A leas 67%
o hei capi al mus be alloca ed o sec o - ela ed equi ies, equi y unds, deben u es,
secu i ies, no es, and o he asse s aded on he s ock exchange, while o eign in es -
men s a e capped a a maximum o 33%. These unds a e ixed- e m and a e di ided
in o se e al ca ego ies, some o which o e signi ican ax bene i s, as ollows.
1) Closed-end equi y unds o s a ups (FMA o FIA – Me cado de Acesso).
2)
Small companies (FIP – Capi al Semen e), wi h an annual u no e o less han
R$ 20 million.
3)
Eme ging companies (FIP – Emp esas Eme gen es), wi h an annual u no e o
less han R$ 400 million.
4)
In as uc u e o esea ch and de elopmen – undos de pa icipação em in es-
imen o em in aes u u a (FIP-IE) and undos de pa icipação em in es imen o
em p odução econômica in ensi a em pesquisa, desen ol imen o e ino ação
(FIP-PD&I) –, which a e ela ed o companies o p ojec s in ene gy, anspo ,
wa e supply, sani a ion, i iga ion o highly in ensi e esea ch and de elopmen
and inno a ion.
5) Mul i-s a egy (FIP – Mul ies a égia) ha is no ied o a speci ic sec o .
6) The FIP-IE and FIP-PD&I we e es ablished in 2007 and 2011, espec i ely, and
a e exemp om axes on di idends and capi al gains. These unds mus ha e a
leas i e sha eholde s, and a leas 90% o hei asse s mus consis o sha es,
deben u es, and o he secu i ies issued by co po a ions in ol ed in de eloping
new in as uc u e p ojec s in B azil. They a e pa o B azil’s sec o al policies
aimed a a ac ing p i a e in es men s, pa icula ly in he sec o s speci ied
in Law No. 11,478/2007, which includes ene gy, anspo , wa e supply, san-
i a ion, and i iga ion. Law No. 12,431/2011 u he b oadened he scope o
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incen i ized FIPs o encompass highly in ensi e esea ch, de elopmen , and
inno a ion sec o s (FIP-PD&I). As o 2022, he e we e app oxima ely 100 eg-
is e ed FIP-IEs, mos ela ed o ene gy p ojec s.
2.7.1 Capi al income and gains
All FIPs a e ax- ee o non esiden s, e en i loca ed in low- ax ju isdic ions. Speci ically,
FIP-IE and FIP-PD&I ha e ax- ee di idends and capi al gains o indi iduals esiden
in B azil,
14
e en wi h hei sha e edemp ion in he seconda y ma ke . Capi al gains o
FIP-IE and FIP-P&D held by B azilian companies and all o he FIPs held by esiden s a e
axed a 15% on ealiza ion.
2.7.2 Capi al ans e ence by sale, dona ion o dea h
Inhe i ance ax le ied by s a e go e nmen s on FIPs ha e he same ules as o he asse s.
3 EFFECTIVE TAX RATES ON SAVINGS VEHICLES IN BRAZIL
This sec ion es ima es he ma ginal e ec i e ax a es (ETR) on income gene a ed and
on o al capi al alue o ele en ypes o sa ings ehicles in B azil: owne -occupied
houses, en al p ope ies held by indi iduals, en al p ope ies held by companies, eal
es a e unds (FII), ixed-income unds, ixed-income bonds, s ocks, p i a e pension
unds, equi y unds (FIA), ag icul u al unds (Fiag o), and exclusi e ixed-income unds
o non- esiden s. The sec ion aims o compa e he ETR di e ences among hese sa ing
ehicles, demons a ing ha axes a e a neu al and ha c ea e signi ican dispa i ies
in axa ion ac oss in es men s. I u he seeks o con i m ha en ed eal es a e is mo e
hea ily axed in B azil, consis en wi h he indings o he OECD (2018).
3.1 Summa izing ax ules on sa ings ehicles in B azil
Table 1 summa izing he axa ion ules acco ding o ou ax e en s: capi al pu chase,
holding, income app op ia ion, app ecia ion (capi al gains) and ans e ence by dea h
o dona ion o he ci ed sa ings ehicles.
14. IN No. 1,585/2015, a . 33, pa . 1s : “ he gains om he sale o sha es o e e ed in es men unds will
be axed a : I – 0% a e i ob ained by an indi idual in ansac ions ca ied ou on o o he s ock exchange”.
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TABLE 1
Taxa ion o di e en sa ings ehicles in B azil (2024)
Sa ings ehicle Income Capi al gains Pu chase Inhe i ance o dona ion Holding
REAL ESTATE
• Ren s ecei ed by indi iduals a e unde he
s anda d p og essi e income ax (up o
27,5%). Impu ed en s o owne -occupied
a e dis ega ded, and mo gage in e es s
a e no deduc ible o indi idual income
ax.
• Ren s ecei ed by eal es a e companies
enjoy lowe a es (6-11%).
• Taxpaye s who own a single p ope y
alued a up o R$ 440,000 (app oxima ely
US$ 80,000 as o Sep embe 2024) a e
exemp .
• P og essi e schedule om 15% o 22.5%,
p e ailing 15%. Taxa ion can be de e ed i
an indi idual buys ano he esidence wi hin
6 mon hs.
• Capi al gains ax is based on a cash
me hod; howe e , expenses such as
mo gage in e es , eno a ions, and some
axes and ees can be used o adjus he
p ope y alue.
• Since 1996, in la ion has no adjus ed o he
acquisi ion alue.
• 2-3% S amp Du y
(ITBI), based on
ma ke alue.
• No a y ees a e
abou 1% o
pu chase alue.
• Inhe i ances and
dona ions ha e
been axed by s a e
go e nmen s a a es
capped a 8% since
1992.
• F om 2024, ax a es
mus be p og essi e
while he Fede al
Sena e main ains
compe ence o se
he op a e. F om
2024, Inhe i ance Tax
includes es a es o
deceden s loca ed
o e seas.
• The exemp ed
h eshold is educed
and a ies among
s a es, a e aging US$
10,000. Low- alued
p i a e esidences a e
also exemp ed by he
s a es.
• The e is no “s ep-up
in basis” on dea h.
Hei s can op o pay
capi al gains ax on he
ans e ence o de e
paymen un il he gains’
ealiza ion.
• U ban P ope y
Tax (IPTU)
• Ru al P ope y Tax
(ITR)
• Fede al Ma ine
P ope y Tax
o Coas al
P ope ies
• No weal h ax.
EQUITIES FUNDS AND STOCKS
• Equi y Funds (FIA)
• Exchange T aded Funds (ETF)
• Asse -backed secu i ies (FIDC)
• O e - he-Coun e secu i ies (OTC)
• B azilian Deposi a y Receip s
(BDRs)
• Di idends o s ocks/sha es di ec ly held by
esiden s and non- esiden s a e exemp ed.
• Di idends om BDRs a e axed acco ding
o he s anda d (p og essi e) income ax
schedule (up o 27.5%).
• In e es on Ne Equi y: 15%.
• CG a e axed on ealiza ion a 15% o
esiden s and 10% o non esiden s. I is a
inal wi hholding a e, no adjus able by he
p og essi e income ax schedule.
• Redemp ions o equi y unds' sha es: 15%
o esiden s and 10% o non esiden s.
• Capi al gains on inancial asse s up o R$
20,000 pe yea a e exemp , excep o BDRs.
• No s amp du ies,
ees may be applied. • No weal h ax.
REAL ESTATE & AGRICULTURAL FUNDS
AND BONDS
• Real es a e unds (FII)
• Ag icul u al unds (Fiag o)
• Real Es a e bonds (CRI & LCI)
• Ag icul u al bonds (CRA & LCA)
• Regula di idends o FII and FIAGRO
a e exemp ed.
• Income ela ed om Real Es a e and
Ag icul u al Bonds a e exemp ed.
• CG o FII and Fiag o a e axed a 20% on
ealiza ion.
INCENTIVIZED EQUITY FUNDS (FIP)
• In as uc u e p ojec s (FIP-IE)
• R&D p ojec s (FIP-PD&I)
• Small companies and s a ups
(FIA-Acesso)
• Eme gen companies (FIP-EE)
• Exemp ed • Exemp ed o indi iduals
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Sa ings ehicle Income Capi al gains Pu chase Inhe i ance o dona ion Holding
FIXED-INCOME FUNDS & BONDS
• Money ma ke unds ( enda ixa)
• Mu ual unds (mul ime cados)
• B azilian go e nmen bonds
• Ce i ica es o deposi (CDB)
• Co po a e bonds ( undo CP)
• OTC swaps
• Gold
• P i a e loans
• Op ions and o wa d con ac s
• Sa ings deposi s (poupança)
• Fixed-income unds o non esiden s
• In e es s acc ued on ixed-income unds o
esiden s a e axed biannually a a es o
15% o 20%, depending on whe he hey a e
om long- e m o sho - e m unds.
• Di idends acc ued on Mu ual Funds ( unds
wi h mo e han 33% o ixed-income
asse s) a e also axed biannually.
• Income om bonds is only axed when
edeemed a he ime o ma u i y a long-
e m a es. In e es s om egula sa ings
accoun s (poupança) a e exemp ed.
• Income om exclusi e long- e m ixed-
income unds o non esiden s a e
exemp ed i go e nmen bonds a e mo e
han 98% o capi al.
• CG on bonds is axed oge he wi h Income
Tax i edeemed be o e hei ma u i y a
long- e m a es. Long- e m CG a es o
ixed-income asse s ange om 15% ( o
mo e han 2 yea s) o 22.5% ( o less han
six mon hs).
• The IOF is le ied i edemp ion o unds and
bonds occu s wi hin less han 30 days.
• No s amp du ies. • No weal h ax.
OFFSHORES ASSETS
• Deposi s
• Money ma ke unds
• Mu ual unds
• T us s
• Ren s
• Insu ance
• C yp o asse s
• O he s (excep equi y unds and
s ocks)
• Since 2024, en s, di idends and in e es s,
acc ued on us s, among o he o sho e
asse s will be axed a 15%, ega dless
hei edemp ion o B azil. Tax base also
includes o he companies indi ec ly
con olled by us s.
• Di idends om holding o sho e s ocks
a e exemp ed.
• Acc ued di idends om o sho e equi y
unds a e axed only upon ealiza ion a
15%.
• F om 2024, capi al gains will be axed on
an acc ual basis a 15%, which includes
he app ecia ion o c yp ocu ency and
di idends on mu ual unds.
• Exchange a e gains a e axed only upon
ealiza ion. Taxpaye s ha e he op ion o
upda e hei o sho e capi al alue up o
Dec 2023 a a educed a e o 8%.
• CG om o sho e equi y and equi y
unds will con inue o be axed only upon
ealiza ion a 15%.
• No S amp Du ies in
B azil.
• Since 2024, asse s
and dono s (including
changes in he sha es
o o sho e us s) ha e
been subjec o he
Inhe i ance Tax.
• Since 2024,
dis ibu ions om
us s in ol ing he
se lo o bene icia ies
will also be subjec o
he Inhe i ance Tax.
• No weal h ax.
LIFE INSURANCE • Exemp ed on li e insu ance payou
• CG ax o 15% is le ied on he edemp ion o edeemable li e insu ances.
• Tax on Financial
Ope a ions (IOF) a
0.38% on p emiums
• Exemp ed
PRIVATE PENSIONS
• Income is axed only upon edemp ion.
• Bene icia ies can choose be ween he
s anda d p og essi e indi idual income
ax (up o 27.5%) o long- e m ax a es
(gene ally he mos a o able egime)
ha a y based on he edemp ion pe iod
( anging om 35% o edemp ions made
in less han 2 yea s o 10% o hose held
o mo e han 10 yea s).
• Con ibu ions a e deduc ible om income
ax up o 12% o o al income.
• Exemp ed • No IOF
• Pensions and bene i s
om closed-end
pension unds a e
exemp ed. Some s a es
ax open-ended pension
unds.
• The Na ional Cong ess
is discussing he
exemp ion o income
acc ued om unds held
o mo e han i e yea s
o p e en ax planning
s a egies.
Sou ces: B asil (2015; 2023b) and o he B azil’s ax legisla ion.
Au ho ’s elabo a ion.
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3103
3.2 Calcula ing ma ginal ETR
Table 2 was p epa ed o compa e he ETR o e i e yea s o an in es men o R$ 1 million
ac oss di e en sa ings ehicles, as ollows.
1) Owne -occupied p ope y.
2) Di ec in es men in en al p ope ies by indi iduals.
3) Ren al p ope ies indi ec ly held by indi iduals h ough companies.
4) Ren al p ope ies indi ec ly held by indi iduals h ough eal es a e unds (FII).
5) Fixed-income unds.
6) Fixed-income bonds.
7) S ocks.
8) Pension Funds.
9) Equi y unds (FIA).
10) Ag icul u al unds (Fiag o).
11) Exclusi e unds o non esiden s.
Conside ing he ma ke si ua ion as o Oc obe 2024, he able e lec s he p esen
alues based on he ollowing assump ions.
1)
P esen alues will be adjus able using an a e age p ime a e o 9% and an
in la ion a e o 4%, esul ing in a ne a e o e u n o 5%.
2)
Annual en al income is equi alen o 7% o he p ope y’s ma ke alue, yielding
a ne e u n o 3%.
3)
P ope y axes and en con ac s in B azil a e adjus ed o in la ion and p ope y
axes a e paid by enan s. The e o e, only owne -occupied p ope ies e ec i ely
pay p ope y axes.
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DISCUSSION PAPER
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3103
4)
A s amp du y o 3% and no a y ees o 1% apply o eal es a e pu chase, while
annual p ope y ax and u ban ees,
15
equi alen o 0.4% o he p ope y’s ma ke
alue a e applied.
5)
A ma ginal income ax a e o 27.5% applies o en al income o indi iduals,
while eal es a e companies a e subjec o an e ec i e a e o 12%.
6)
Fixed-income asse s and pension unds (ne ) yield 5% pe yea , whe eas FIIs, Fia
-
g os, sha es and equi y unds (ne ) yield 8%. FIIs, Fiag os and s ocks ha e ax- ee
di idends while acc ued di idends on equi y unds a e axed a 15% upon ealiza ion.
In addi ion, capi al gains ax is le ied a 15% on he nominal di e ence be ween
he pu chase alue and he sale alue, bu in he case o FIIs and Fiag os, he
a e is 20%.
7)
The axpaye will ha e an annual income equi alen o 1,800% o he a e age
sala y (R$ 600,000 pe yea , adjus ed by in la ion) and will deduc 12% o hei
o al income o con ibu ions o pension und. Acc ued income om pension
unds is axed a 20% i wi hd awn wi hin i e yea s o in es men and a 10% i
wi hd awn a e en yea s.16
8) An inhe i ance ax o 4%, along wi h no a y ees o 1%, is applicable a e dea h
as es ablished in he S a e o São Paulo. Acco ding o legisla ion, he inhe i ance
ax base is he o al capi al alue including he acc ued income o ixed-income
and equi y unds, while i is he asse ’s ma ke alue o eal es a e, FIIs, s ocks,
and Fiag o.
9)
I is assumed ha a e i e and en yea s, eal es a e, FII, Fiag o and s ocks will
expe ience nominal app ecia ion o 33.8% and 79.1%, espec i ely, e lec ing an
in la ion a e o 4% alongside an a e age annual GDP g ow h o 2%. I is impo an
o no e ha , acco ding o capi al gains ax ules, asse alues a e no adjus ed o
in la ion o in e es .
15. U ban ees a e hose cha ged oge he wi h u ban p ope y ax by municipali ies and gene ally comp ises
ga bage collec ion ee o public cleaning ee.
16. In he case o pension unds, he ini ial in es men is educed o allow o a maximum deduc ion o
12% o indi idual income. Fo example, o a 10-yea in es men , he ini ial in es men will be R$ 470,074
ins ead o R$ 1,000,000, as wi h o he in es men s. This adjus men will no a ec he compa isons among
di e en sa ings ehicles.
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TABLE 2
ETR on acc ued income and capi al o an in es men o R$ 1,000,000 o e i e yea s, conside ing pu chase,
holding, income, inhe i ed and ealiza ion, ma ke condi ions o 2024, 5% ne a e o e u n, p esen alues
S age Yea
Real es a e Financial asse s
P ima y1Ren ed
indi idual2
Ren ed
company2
FII and
Fiag o2,3
Fixed
income
unds4
Fixed
income
bonds
S ocks2,3 Pensions
und5
Equi y
und2
Non-
esiden s6
Pu chase
S amp du ies Y0 40,000 40,000 40,000 – – – – – – –
Holding
P ope y ax
U ban ees
Y0 4,000 – – – – – – – – –
Y1 3,810 – – – – – – – – –
Y2 3,628 – – – – – – – – –
Y3 3,455 – – – – – – – – –
Y4 3,291 – – – – – – – – –
Income
Income Tax
Y0 – 7,857 3,429 – 7,143 – – -18,857 – –
Y1 – 7,483 3,265 – 7,091 – – -17,959 – –
Y2 – 7,127 3,110 – 7,041 – – -17,104 – –
Y3 – 6,787 2,962 – 6,991 – – -16,290 – –
Y4 – 6,464 2,821 – 6,941 – – -15,514 – –
Inhe i ance
Inhe i ance ax7Y4 41,941 41,941 41,941 41,941 38,592 40,000 41,941 – 46,050 –
Disposal
Capi al gains8Y4 33,460 33,460 33,460 44,613 – 32,471 33,460 43,295 48,252 –
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Figu e 4 shows he e enues om a ious sou ces o capi al gains om 2004 o
2024, including ixed-income open-ended unds, di ec holding o ixed-income bonds,
o he unds and in es men s, swap ope a ions, in e es on ne equi y, income de i ed
om Law No. 14,754/2023 and o he sou ces ( o example, capi al gains ax on eal
es a e, equi y unds and s ocks).
Figu e 4 indica es ha income om ixed-income asse s accoun ed o app oxima-
ely 75% o o al capi al gains ax e enues be ween 2004 and 2012. This pe cen age
dec eased o 65% be ween 2012 and 2023 and u he educed o 60% in 2024 due o
he ise o e enues om o he sou ces. Indeed, e enues gene a ed due o Law No.
14,754/2023, amoun ed o R$ 20.7 billion, ep esen ing 23% o o al capi al gains ax
e enues collec ed om Janua y o No embe 2024.
FIGURE 4
Capi al gains ax e enues pe sou ce o income1
45 45 45 39 34 35 34 35 34 26 31 34 35 35 30 32
21 25
35 30
22
30 32 31
35 39 38 42 41 45
38 36 32 34 33
30 29
27
26
34 39
323
37
0
20
40
60
80
100
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Fixed-income unds
In e es on ne equi y
Fixed-income bonds
Law No. 14,754/2023
Swap ope a ions
O he s ( eal es a e, sha es, e c)
Sou ce: B asil (2024).
Au ho ’s elabo a ion.
No e: 1 To al = 100.
Obs.: 1. Capi al gains de i ed om o sho e us s, closed-end unds and he upda e o o sho e
asse s, acco ding o Law No. 14,754/2023.
2. Fo 2024, alues a e om Janua y o No embe In 2024, he collec ion o R$ 20.7 billion
de i ed by Law No. 14,754/2023 is di ided in o R$ 13 billion om p i a e closed-end unds
and R$ 7.7 billion om he upda e o o sho e asse s.
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3103
5 PROPOSALS TO REDUCE REGRESSIVITY: A TOP-UP INCOME TAX
5.1 Tax a oidance ela ed o esidence s a us
The enac men o Law No. 14,754/2023 was a way o close some exis ing loopholes in
B azil’s ax sys em. Di idends ha e been ax- ee since 1993, which is he main eason
o income ax eg essi i y (Gobe i, 2024). F om 1998 o 2023, e y weal hy indi iduals
could c ea e p i a e closed-end unds o o sho e us s o manage hei capi al wi h
axa ion only on ealiza ion. Less weal hy indi iduals biannually pay come-co as on
open-ended ixed income o mu ual unds. The Law b ough a new way o ax he capi al
o weal hy indi iduals in he same way as gene al ci izens. Howe e , B azilian legisla ion
s ill has loopholes ha enable weal hy indi iduals o a oid he acc ual axa ion on hei
capi al. As shown by sec ion 2, he pensions unds a e axed only on ealiza ion unde
long- e m ax a es, wi h a educed a e o 10% i he edemp ion occu s o mo e han
10 yea s. Real Es a e Funds (FII) and Ag icul u al Funds (Fiag o) a e di idend- ee unds
ha may ha e a highe di idend yield han ixed income and, despi e he isks, in es -
men s can be lowed o hem due o he Law No. 14,754/2023. Equi y Funds (FIA) do no
p o ide ecu en di idends, bu hei acc ued di idends a e o ally axed on ealiza ion,
which may be an al e na i e o p i a e closed-end unds.
Howe e , he be e s a egy o a oid axes and con inue in es ing in B azil is o change
coun y o esidence. I i is no classi ied as a “low- ax ju isdic ion” acco ding o he lis o
coun ies in RFB IN No. 1,037/2010 (B asil, 2010), he in es o can bene i om comple e
ax exemp ion on exclusi e o eign in es o s’ equi y unds (which mus consis o a leas
85% in s ocks and o he secu i ies) o ixed-income unds (which mus con ain a leas
98% in go e nmen bonds). This s udy highligh s six coun ies ha a e no conside ed
ax ha ens by B azilian legisla ion bu do p o ide la ge ax incen i es o new esiden s:
Swi ze land, Po ugal, U uguay, Spain, I aly, and G eece.
Swi ze land p o ides a lump-sum ax ag eemen (Fo ai Fiscal) a ailable o expa ia-
es and high-ne -wo h indi iduals who a e no Swiss ci izens o do no ha e a pe manen
esidence. Ins ead o axing expa ia e’s ac ual wo ldwide income and asse s, he lump-sum
ax amoun is based on hei li ing expenses and s anda d o li ing in Swi ze land.
Po ugal in oduced he Non-Habi ual Residen Regime – NHR (Regime Especial
pa a Residen es não Habi uais) in 2009, which was enhanced in 2020. The applican
mus no ha e been a ax esiden in Po ugal in he i e yea s p io o hei applica ion
and mus s ay a minimum o 183 days in he yea o ha e a pe manen home in he
coun y. Speci ically, expa ia es’ capi al income and gains a e ax exemp ed.
33
DISCUSSION PAPER
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3103
U uguay also has a special ax egime o new esiden s: indi iduals who become
ax esiden s a e esiding in ano he coun y may be exemp om income ax on
o eign-sou ce income o he i s h ee yea s o esidency in U uguay.
In Spain, he Royal Dec ee No. 687/2005, called Beckham Law ( oo balle Da id
Beckham became one o he i s o eigne s who applied), p o ides se e al incen i es
o weal hy indi iduals who decide o become a Spanish esiden i hey did no eside
in he coun y in he i e yea s p io o hei applica ion. They mus ha e an employmen
unde a con ac o a ele an in es men (Golden Visa P og am). Spanish-sou ced
income is axed a 24%, bu o eign income is exemp ed.
In 2017, I aly in oduced a “lump-sum ax” on o eign-sou ced income o new esi-
den s. P io o 2023, his alue was 100,000 eu os bu was inc eased o 200,000 eu os in
2024. G eece has a simila policy: in 2022, he “Non-Domiciled Tax Regime” was c ea ed
wi h a 100,000 eu os lump-sum ax on o eign-sou ced income. In addi ion, Pa aguay,
which is a coun y ha bo de s B azil and esidence o many B azilian na ionals, does
no p o ide a speci ic incen i e o new esiden s, bu i s income ax a e is only 10%.
Conclusi ely, i can be no ed ha p o iding esidence incen i es is a g owing
global end a e he pandemics, especially in Eu opean coun ies ha can o e
high quali y o li e o hei esiden s. Weal hy B azilian na ionals can eside in hese
coun ies, manage companies and in es men s emo ely and enjoy ax- ee capi al
income de i ed om B azil. The e o e, B azil mus ha e mo e s ic ules o esidency
s a us. Fo example, ca aloguing coun ies ha p o ide such incen i es and adding
hem in RFB IN No. 1,037/2010 (B asil, 2010). They will be conside ed as esiden s
o a “low- ax ju isdic ion” o pe sonal income ax ules.
5.2 Th ee app oaches ha can e ec i ely ax weal hy B azilians
This s udy has demons a ed ha capi al income is highly unde axed compa ed o
labo income. This sec ion explo es h ee p oposals o e ec i ely ax weal hy indi iduals
whose capi al income is he main componen o hei o al income and, he e o e bea
a low e ec i e ax a e. The i s wo p oposals can be conside ed mo e classical, while
he hi d is mo e con empo a y, based on s udies o OECD (2020) and Zucmann (2024).
The i s p oposal is o implemen a ax on di idends, which a e cu en ly exemp in
B azil. This could be designed as a 15% inal wi hholding ax, simila o ha applied o
o he sa ings ehicles discussed on sec ion 2. Al e na i ely, as a gued by Gobe i (2024),
di idends could be inco po a ed in o a comp ehensi e income ax amewo k, allowing
34
DISCUSSION PAPER
3103
o a pa ial deduc ion o he co po a e income ax paid a he i m le el, including hose
unde a o able p esump i e egimes,
17
he eby enhancing ho izon al p og essi i y.
Howe e , ocusing solely on di idend axa ion o e looks exis ing loopholes ela ed
o exemp ed o un ealized capi al gains, as well as he low axa ion o inhe i ances
and dona ions, which a e signi ican sou ces o income o he weal hies indi iduals.
Addi ionally, he e a e a ious exemp ions, caps, and allowances ha can bene i hem,
including exemp ions o income de i ed om s ock bonuses and inge bene i s gi en
o company di ec o s o execu i es, as well as income ax deduc ions o pension unds
and uncapped medical allowances. Weal hy indi iduals a e mo e likely o engage in ax
planning s a egies ha exploi hese legisla i e loopholes.
The second p oposal is a mo e adi ional app oach: a ne weal h ax. This could
be implemen ed mo e easily since B azil’s Cons i u ion al eady includes a p o ision
(a . 153, VII) o a Tax on La ge Fo unes (IGF). Howe e , i has ne e been imple-
men ed despi e wo o ing sessions in he Na ional Cong ess, held in 2000 and 2008.
Conside ing expe iences o Eu opean coun ies ha cu en ly ha e o ha e p e iously
implemen ed weal h axes, i appea s ha weal h axes equi e minimal exemp ions
and a ela i ely b oad axpaye base o yield signi ican e enue ou comes. Thei main
challenges in ol e he capi al alua ion and he lack o liquidi y o ce ain asse s. The
ax would likely ely on sel -decla ed alues, pu chase p ices, o book alues, which can
o en be ou da ed. Addi ionally, owne -occupied esidences and amily businesses may
encoun e liquidi y and alua ion di icul ies and consequen ly ha e been his o ically
exemp ed om weal h ax.
The hi d p oposal is inspi ed by some elemen s and mechanisms o he OECD model
o he minimum co po a e income ax, he Pila 2 (OECD, 2020), he epo by Zucman (2024)
de ending a minimum ax on he wo ld’s billionai es, he p oposal by Hebous e al. (2024) o
axing un ealized capi al gains, and he s udy by Gobe i (2024) on indi idual income ax
e o m in B azil. This s udy main p oposal consis s o a Top-Up Indi idual Income Tax (TUIIT)
on weal hy axpaye s’ o al income, wi hou applying any exemp ion, exclusion o educ ion.
TUIIT would be implemen ed h ough he ollowing s eps.
17. Acco ding o Gobe i (2024), al hough B azil has a s anda d co po a e income ax a e o 34%, 99% o
egis e ed companies ope a e unde p esump i e ax egimes wi h e ec i e a es anging om 6% o 14%
o o al u no e . He es ima es ha 70% o dis ibu ed di idends come om companies subjec o hese
p esump i e ax egimes.
35
DISCUSSION PAPER
DISCUSSION PAPER
3103
1)
An analysis would be conduc ed o he e ec i e indi idual income ax a es
wi h manda o y social con ibu ions ac oss di e en income s a a, using da a
om income ax decla a ions.
2)
The highes e ec i e ax a e among all s a a would be iden i ied as he “ op-up”
a e, wi h i s co esponding income le el se ing as he ax h eshold.
3)
Consequen ly, all uppe -income s a a ha a e cu en ly subjec ed o lowe e ec-
i e axa ion would ha e hei income ax liabili ies “ opped-up” by he new ax.
5.3 Designing a TUIIT o B azil
Unlike o he a icles ha analyze income ax eg essi i y in B azil using income ax
decla a ion da abases (Gobe i, 2024; Gobe i and O ai , 2016; In oíni e al., 2018), his
s udy in oduces an inno a i e app oach by including manda o y social con ibu ions
as pa o he e ec i e axa ion on income, gi en ha bo h B azil’s go e nmen and he
OECD (2022b) classi y social con ibu ions as a ax. In B azil, social con ibu ions a e
manda o y o e e yone; howe e , hey a e only pa ially linked o he bene i s ecei ed
and esemble a ax mo e han a “con ibu ion” o a p i a e und. Addi ionally, his s udy
conside s income de i ed om inhe i ances and dona ions ecei ed wi hin a yea as
pa o axpaye s’ o al income. I will be assumed ha s a e go e nmen s e ec i ely
axed 2% o inhe i ances and dona ions, and consequen ly 98% o hei epo ed alues
will be included in he analysis.
Figu e 5 illus a es he e ec i e ax a e o axpaye s’ g oss income (including
inhe i ances and dona ions) in 2022, including income ax alone as well as combined
wi h manda o y social con ibu ions. The igu e indica es ha he op e ec i e ax a e
(wi hou social con ibu ions) is equal o 10%, and i is eached wi hin he income pe -
cen iles P91 o P94. This a e sligh ly dec eases o 9.3% in pe cen iles P97 o P98, and
hen alls mo e sha ply, d opping o only 3.5% among he op 1%.
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DISCUSSION PAPER
3103
FIGURE 5
E ec i e ax a e on axpaye s’ o al income1 be ween income s a a
(P20-P100) wi h and wi hou social con ibu ions (2022)
(In %)
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Income ax Income ax and social con ibu ions
P20-21
P21-22
P22-23
P23-24
P24-25
P25-26
P26-27
P27-28
P28-29
P29-30
P30-31
P31-32
P32-33
P33-34
P34-35
P35-36
P36-37
P37-38
P38-39
P39-40
P40-41
P41-42
P42-43
P43-44
P44-45
P45-46
P46-47
P47-48
P48-49
P49-50
P50-51
P51-52
P52-53
P53-54
P54-55
P55-56
P56-57
P57-58
P58-59
P59-60
P60-61
P61-62
P62-63
P63-64
P64-65
P65-66
P66-67
P67-68
P68-69
P69-70
P70-71
P71-72
P72-73
P73-74
P74-75
P75-76
P76-77
P77-78
P78-79
P79-80
P80-81
P81-82
P82-83
P83-84
P84-85
P85-86
P86-87
P87-88
P88-89
P89-90
P90-91
P91-92
P92-93
P93-94
P94-95
P95-96
P96-97
P97-98
P98-99
P99-100
Sou ce: B asil (2023a).
Au ho ’s elabo a ion.
No e: 1 To al income includes inhe i ances and dona ions. The s udy es ablishes an e ec i e axa-
ion on inhe i ances and dona ions o 2%, conside ing he 4% s a u o y a e in s a e o São
Paulo, bu i can a y om 2% o 8% among s a es.
Rega ding he combined axa ion om income ax and manda o y social con i-
bu ions,18 he highes e ec i e ax a e is equal o 14% and i is obse ed wi hin he
income pe cen iles P86 o P95, beginning a a mon hly income le el o R$ 14,343
(P86). This a e sligh ly dec eases o 12.6% be ween pe cen iles P97 o P98, declines
o 9.9% om P98 o P99 and hen alls mo e sha ply, d opping o only 3.9% among
he op 1%.19 The eason o his dec ease is ha exemp capi al income is much
mo e p e alen among he weal hies indi iduals, in con as o labo income, which
is subjec o bo h income ax and capped social con ibu ions. Based on he 2022
income ax da abase (B asil, 2023a), he p oposed TUIIT a e would be se a 14% o
he op 2% iches axpaye s. Figu e 6 p esen s a scena io e lec ing his p oposal.
18. Fo p i a e wo ke s, he mon hly cap o public pensions (INSS) is R$ 7,786, wi h a maximum deduc ible
con ibu ion o R$ 877, o 11%. Fo public wo ke s, he cap is R$ 44,008, wi h a op deduc ible con ibu ion
o R$ 7,205, o 16%.
19. The e ec i e ax a e (including social con ibu ions) among he op 0.1% and 0.01% iches was 2.2%
and 1.4%, espec i ely.
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DISCUSSION PAPER
DISCUSSION PAPER
3103
FIGURE 6
E ec i e axa ion wi h and wi hou a 14% TUIIT on he weal hies 2% axpaye s
(In %)
13.8
14.2
14.0
14.0
13.8
13.5
13.3
12.6
9.9
8.1
7.6
7.2
6.7
6.2
5.7
5.1
4.4
3.7
2.2
0
2
4
6
8
10
12
14
P90-91
P91-92
P92-93
P93-94
P94-95
P95-96
P96-97
P97-P98
P98-P99
P99-99.1
P99.1-99.2
P99.2-99.3
P99.3-99.4
P99.4-99.5
P99.5-99.6
P99.6-99.7
P99.7-99.8
P99.8-99.9
P99.9-100.0
Income ax and social con ibu ions wi h a TUIIT o 14%
Income ax and social con ibu ions
Sou ce: B asil (2023a).
Au ho ’s elabo a ion.
5.3.1 Who a e he op 2% iches axpaye s?
Acco ding o he o icial da abase o income ax decla a ions o 2022 (B asil, 2023a),
he op 2% iches axpaye s consis o 768,355 indi iduals wi h g oss mon hly income
(including ecei ed inhe i ance and dona ions) highe han R$ 52,504, axable income
abo e R$ 28,534 and ne weal h exceeding R$ 2.14 million.20 Howe e , he e is a limi a ion
ega ding weal h alues in he da abase, as hey may be ou da ed, o en e lec ing only he
pu chase p ice. This disc epancy highligh s he signi ican gap be ween g oss and axable
income, which ends o widen as o al income inc eases, p ima ily due o he exemp ion on
di idends. Fo ins ance, he op 0.5% iches axpaye s epo a o al income g ea e han
R$ 121,058 and a axable income exceeding R$ 50,680 (42% o o al income).
Table 4 p esen s he a e age o al income and ne weal h alues among he op
10% iches axpaye s, while able 5 de ails he sou ces o income, including labo and
pensions, di idends and in e es on ne equi y, axable ixed-income, axable capi al
gains, inhe i ances, and o he sou ces.
20. Mos bills in he Na ional Cong ess ega ding he Tax on La ge Fo unes p opose a h eshold o
R$ 50 million, which is signi ican ly highe han he epo ed weal h o he 98 h income pe cen ile.
38
DISCUSSION PAPER
3103
TABLE 4
G oss income and ne weal h alues among he op 10% iches axpaye s (2022)
S a a
A e age alue (R$) Sha e on o al alue (%)
Taxpaye s
Mon hly
g oss
income
E ec i e
ax a e
Ne
weal h S a a Taxpaye s To al
income
To al ne
weal h
P90 – 95 1,920,838 22,732 14.0% 675,667 Top 10% 3,841,676 51.5 58.5
P95 – 98 1,152,503 37,202 13.1% 1,363,306 Top 5% 1,920,838 40.6 49.8
P98 – 99 384,168 60,745 9.9% 2,648,139 Top 2% 768,335 29.8 39.1
P99 – 99.5 192,084 93,960 7.2% 4,190,221 Top 1% 384,167 23.9 32.2
P99.5 – 99.9 153,667 195,498 4.7% 9,834,036 Top 0.5% 192,083 19.4 26.8
P99.9 – 99.99 34,575 752,523 3.0% 38,813,268 Top 0.1% 38,416 11.9 16.5
P99.99 – 100 3,841 5,542,811 1.4% 285,815,548 Top 0.01% 3,841 5.3 7.4
Sou ce: B asil (2023a).
Au ho ’s elabo a ion.
Acco ding o able 4, in 2022, he op 2% iches axpaye s accoun ed o 29.8% o
o al income and 39.1% o o al ne weal h. In con as , he op 0.1%, hose wi h app o-
xima ely mon hly g oss income exceeding R$ 384,501 and ne weal h o e R$ 17.55
million, held 11.9% o o al income and 16.5% o o al ne weal h.
Rega ding income composi ion, able 5 indica es ha labo emains he p ima y
sou ce o income up o he op 2% ea ne s. Beyond ha h eshold, he sha e o labo
income begins o decline, while exemp di idends signi ican ly inc ease, eaching
50.7% among he op 0.1% iches axpaye s. In addi ion, o he income sou ces, which
include exemp capi al gains, en s, and insu ance payou s, comp ised 15.7% o hei
o al income.
TABLE 5
G oss income composi ion among he axpaye s’ income s a a (2022)
(In %)
Sou ce P20 – 501P50 – 90 P90 – 98 Top 2% P98 – 99 P99 – 99.5 P99.5 – 99.9 Top 0.1%
Labo and
pensions 83.3 79.7 62.9 19.8 43.4 30.5 17.3 5.6
Ru al business 0.6 1.7 2.7 6.1 3.9 5.3 7.8 6.4
Di idends, INE
and bonus22.7 6.5 16.3 41.4 26.7 34.0 42.6 50.7
Taxable capi al
gains 0.0 0.1 0.7 5.6 1.6 2.4 3.9 9.8
39
DISCUSSION PAPER
DISCUSSION PAPER
3103
Sou ce P20 – 501P50 – 90 P90 – 98 Top 2% P98 – 99 P99 – 99.5 P99.5 – 99.9 Top 0.1%
Fixed-Income 1.2 2.4 4.5 7.9 6.5 7.4 8.3 8.4
Inhe i ances
and dona ions 2.5 2.2 2.5 3.4 3.2 3.7 3.8 3.2
O he s19.6 7.4 10.4 15.8 14.7 16.6 16.2 15.7
To al 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Sou ce: B asil (2023a).
Au ho ’s elabo a ion.
No es: 1 The s a a P0-20 was excluded because he e a e some ou lie s.
2
INE – In e es on Ne Equi y and Bonus – Inco po a ion o Capi al Rese es and S ock Bonuses.
3
Among he op- iches , he mos ele an sou ces o income epo ed as “o he s” by RFB da a-
base a e “Exemp ed capi al gains”, “Ren s”, “Insu ances”, and “Income om o e seas”. This was
e i ied by ano he RFB da abase, which does no p o ide he da a di ided in o income s a a.
5.3.2 A Top-up income ax: wo mechanisms
In he i s app oach, gi en ha a di ec op-up ax on indi idual income may be deemed
uncons i u ional in B azil, he Tax on La ge Fo unes (IGF), as p o isioned by he Cons-
i u ion, could be implemen ed wi h a high a e and a low weal h h eshold – such as
a ax a e o 3%21 applied o a h eshold o R$ 2 million, bu wi h a cap o 14% on o al
income. This would unc ion as a TUIIT o high ea ne s, ollowing a simila amewo k
p oposed by Zucman (2024), bu wi h a b oade base since i would no be es ic ed
o billionai es.
Unde his p oposal, income ax, manda o y social con ibu ions and inhe i ance
ax22 e ec i ely paid by axpaye s wi h a leas R$ 2 million in ne weal h would be
deduc ible om hei 3% IGF, which would be capped a 14% o hei o al income. This
app oach aims o equalize axa ion ac oss high-income s a a. Howe e , he implemen-
a ion aces a poli ical challenge due o i s low weal h h eshold. The op 2% iches
axpaye s a e hose wi h epo ed ne weal h exceeding R$ 2.14 million, which may be
conside ed poli ically oo low o a weal h ax h eshold, e en i adjus men s o weal h
alua ion could aise his h eshold. In addi ion, indi iduals wi h ela i ely highe income
bu lowe epo ed weal h would bene i , which unde mines ho izon al equi y.
The second app oach would be mo e s aigh o wa d: i in ol es amending indi
-
idual income ax legisla ion o in oduce an addi ional op-up ax a e o 14% on o al
21. I is expec ed ha cases in which 3% o axpaye s' weal h exceeds 14% o hei o al income will be e y a e.
22. This may encou age s a es o e ec i ely ax inhe i ances since exemp ions o educ ion would be compen-
sa e by a highe TUIIT.
40
DISCUSSION PAPER
3103
income ha exceeds he h eshold o he op 2% iches axpaye s, which was R$ 52,504
(o app oxima ely R$ 50,000) in 2022.
23
This o al income includes inhe i ances, ce ain
cu en ly exemp ed capi al gains, and o he exemp o deduc ible income.
This p oposal p esen s a challenge: i he h eshold is se a R$ 50,000, some indi i-
duals wi h o al income sligh ly below his amoun may expe ience an e ec i e ax a e
signi ican ly lowe han 14%, which unde mines ho izon al equi y. The e o e, his p oposal
would bene i om implemen ing a inal wi hholding ax on di idends, which may be a
signi ican sou ce o income o some o he op 5% iches axpaye s. This would enhance
ho izon al equi y, wi h a TUIIT se ing as a esidual ax applied o o he cu en ly exemp
income o he op 2%, minimizing ax a oidance. The TUIIT a e would be applied o he
ax schedule s a ing om he income le el o R$ 50,000, as ou lined in he p oposed
schedule shown in able 6.
Indeed, p elimina y calcula ions es ima e ha a 14% TUIIT has maximum po en ial
o R$ 127.5 billion in e enues i a wi hholding ax on di idends was no implemen ed,
ep esen ing 44.6% o he indi idual income ax le ied in 2022. Howe e , his is an ini ial
es ima e o i s maximum po en ial, and a mo e de ailed assessmen , including possible
exclusions and a bi age oppo uni ies, will be necessa y. None heless, he po en ial o
a bi age is smalle compa ed o di idend axa ion alone, as he p oposal encompasses
all sou ces o income. Addi ionally, i is essen ial o es ablish an “exi ax” o weal hy ax-
paye s who choose o change hei esidence s a us, simila o he Uni ed S a es, whe e an
exi ax applies o un ealized capi al gains in he e en o a axpaye changing ci izenship.
TABLE 6
P oposed indi idual income ax schedule wi h a TUIIT
B acke
(R$) Pe cen ile Ra e
0 – 2,259 0-9 Exemp ed
2,259 – 2,827 9-18 7,5%
2,827 – 3,751 18-35 15.0%
3,751 – 4,665 35-47 22.5%
4,665 – 50,000 47-98 27.5%
O e 50,000 98-100 TUIIT 14.0%
Au ho ’s elabo a ion.
23. I is impo an o no e ha no e e yone ea ning mo e han R$ 50,000 would be subjec o TUIIT. Fo ins ance,
some high-ea ning public se an s a e subjec o a 16% a e on social con ibu ions, which likely esul s in an
e ec i e income axa ion ha exceeds 14%.
47
DISCUSSION PAPER
DISCUSSION PAPER
3103
OECD – ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT. Inhe i-
ance axa ion in OECD coun ies. Pa is: OECD Publishing, Ma . 2021. (OECD Tax Policy
S udies, n. 28). Re ie ed om: h ps://www.oecd.o g/en/publica ions/inhe i ance- ax-
a ion-in-oecd-coun ies_e2879a7d-en.h ml.
OECD – ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT. Hous-
ing axa ion in OECD coun ies. Pa is: OECD Publishing, 2022a. (OECD Tax Policy
S udies, n. 29). Re ie ed om: h ps://www.oecd.o g/en/publica ions/housing- axa-
ion-in-oecd-coun ies_03d e007-en.h ml.
OECD – ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT. Re -
enue s a is ics 2022: he impac o COVID-19 on OECD ax e enues – 1965-2021.
Pa is: OECD Publishing, 2022b. Re ie ed om: h ps://www.oecd.o g/en/publica ions/
e enue-s a is ics-2022_8a691b03-en.h ml.
ZUCMAN, G. A bluep in o a coo dina ed minimum e ec i e axa ion s anda d o
ul a-high-ne -wo h indi iduals. Pa is: EU Tax Obse a o y, 25 June 2024. Re ie ed
om: h ps://www. axobse a o y.eu/publica ion/a-bluep in - o -a-coo dina ed-mini-
mum-e ec i e- axa ion-s anda d- o -ul a-high-ne -wo h-indi iduals/.
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