The expiration of MP 1,303 came as a sad surprise for the Brazilian Federal Government and a temporary relief to Brazilian investors, including those with assets abroad, as well as to the financial technology and online gambling sectors.
With the rejection of the MP, the following key points remain in place:
- Income from financial investments in Brazil, including fixed-income funds, CDBs, and Tesouro Direto, remains subject to regressive taxation rates (22.5% to 15%), rather than the fixed rate of 17.5%.
- Income from financial investments abroad remains subject to a 15% income tax rate, with the proposed increase to 17.5% being removed.
- Cryptocurrencies remain exempt up to BRL 35,000, while stocks and stock funds continue to be taxed at 15%, and day trading operations are taxed at 20%.
- CSLL rate for fintechs remains at 9%.
- Online betting will not see a tax increase from 12% to 18%.
- Dividends paid by FIIs/Fiagros to individuals remain exempt, as do other investments linked to agribusiness and real estate securities (LCA, LCI, CRI, CRA, and Incentivized Debentures).
- Taxation of JCP remains at a 15% income tax withholding, instead of the proposed 18%
In addition to the political impact, the MP’s defeat also affects the economy and financial markets. Other measures aimed at reducing the current fiscal deficit are now under greater pressure to be approved, including the proposal to tax dividends, and potential changes to the taxation of IOF and IPI via decree.