Currently, foreigners pay a 15% capital gains tax on local private sector bonds, but are exempt from the tax when investing in Brazil’s stock market and public debt.
Brazilians pay a tax of between el 15% and 22.5% on corporate bond yields, depending on how long they are held.
Two Economy Ministry officials said a decree containing the change is being drafted as part of a minor capital market reform, which was confirmed by two other ministry sources.
By opening the door to more foreign investment in Brazil’s capital markets, the country hopes to attract dollars and strengthen the local currency, which would help ease double-digit inflation, one of the sources said.
The Brazilian real has strengthened more than 7% against the dollar this year, buoyed by net financial inflows of just over $10 billion.
In 2006, Brazil exempted foreigners from paying income taxes on their investments in government bonds, helping the government extend its debt maturities and boost inflows.
One source said a decree providing a similar exemption for private bonds should be ready soon, following studies by Brazil’s Treasury and fiscal service. The measure would require congressional approval to become permanent.
Source: Ambito
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