Making offline transfers, streamlining real estate purchase and sale processes and facilitating international payments are among the nine projects selected by the Central Bank of Brazil (BCB) innovation laboratory that works on solutions for Real Digital, which should be launched in 2024. Real Digital is a virtual representation of the currency that circulates in the Brazilian economy. The project emerged in the global wake: the growth of cryptocurrencies spurred central banks across the planet to develop their own digital currencies.
The first projects were selected with the work of the Lift Challenge carried out by the National Federation of Central Bank Server Associations (Fenasbac) together with the BCB started in September and bring together projects from various institutions, such as Itaú, Santander, Tecban, Visa and Mercado Bitcoin. The Real Digital will have the same value and can be freely converted into bank deposits, into paper money and can be used for purchases, payment of bills and personal transfers, just like the conventional Real. The main difference is that it may have new functions that are being developed, expanding applications that are not possible with the real "conventional".
BCB will select projects to advance to the pilot phase that will last until the second half of 2024. The objective is for the projects to undergo tests with clients in a reduced scope to validate the ideas in a close to real environment.
The Monetary Policy Committee (Copom) of the Central Bank of Brazil decided to maintain the Selic rate at 13.75% per year – a level in effect since the beginning of August.
The basic interest rate has been raised for 12 consecutive times since March 2021. In the period, the Selic rate rose 11.75 percentage points, configuring the biggest and longest cycle of increase since 1999.
According to financial market analysts' projections, the Selic rate should remain at this level until June 2023 — when it will decline to 13.5% per year. For the end of next year, the projection is for interest at 11.25%.
After exploratory talks to find common ground on the principles for a possible Double Tax Treaty (DTT), the United Kingdom and Brazil announced that the first round of negotiations were held between 12 and 16 September 2022.
A Double Tax Treaty has been a consistent ask of businesses in both the UK and Brazil. The signing of an agreement will have an important role to play in increasing cross-border trade and investment, providing long term certainty and stability to business, and in enhancing our bilateral relationship.
This also helps Brazil to expand their network of agreements to avoid double taxation, especially with nations that are part of the Organization for Economic Cooperation and Development (OECD), counting as a relevant matter for their participation as a member of the organization.
Representatives of the Federal Revenue Service of Brazil and tax authorities of the Polish Ministry of Finance have concluded negotiations on an agreement that will eliminate double taxation on income and prevent tax evasion.
The document strengthens cooperation between the tax administrations of the countries, promotes the exchange of information and the best international tax practices, in addition to providing greater legal certainty for Brazilian and Polish transnational companies.
The signing of the document expands the Brazilian network of agreements to avoid double taxation, especially with nations that are part of the Organization for Economic Cooperation and Development (OECD), a relevant fact for the country's entry as a member of the entity. Now with Poland, there will be 25 OECD member countries with agreements of this kind signed with Brazil.
We reiterate the need for the ratification of the treaty in Brazil for the document to enter into force.
On September 22nd, 2022, two Provisional Presidential Decrees were published in the Official Gazette of the Union that change the Individual Income Tax. We highlight the main aspects below:
MP No. 1,137/2022: Remuneration under Applied Capital - resident or domiciled abroad:
Reduces to zero the Individual Income Tax rates levied on non-resident gains, obtained between January 1, 2023 and December 31, 2027, through income from Equity Investment Funds (FIP), Investment Funds in Quotas of Funds of Equity Investment and Investment Funds in Emerging Companies.’
The exemption also covers non-resident gains from fixed income securities issued by corporations and securities issued by banks. Currently, non-resident investors are subject to a 15% IRRF rate on capital gains issued by Brazilian companies.
MP No. 1,138/2022: Remittances abroad, personal expenses, tourism, business and others
Establishes the reduction of the withholding income tax rate levied on amounts remitted to individuals or companies residing abroad to cover expenses of individuals residing in Brazil with international travel up to the limit of 20 thousand reais.
The withholding income tax rate levied on these operations will be reduced from 25% to 6% between 2023 and 2024, increasing by 1% each year until reaching 9% in 2027, as follows:
