This article is intended for use by financial advisers who provide advice outside of Brazil to clients who are habitually resident in Brazil. It only applies to Old Mutual International business which is completed outside of Brazil.
General information regarding Brazilian residents
Brazilian taxpayers are subject to tax on their worldwide income.
Tax relief on contributions
There is no tax relief on contributions. Old Mutual International requires contributions to be made from resources outside of Brazil.
Tax on total encashment
The total encashment of the account would be subject to capital gains tax (CGT). As the account has been sourced from resources outside of Brazil the capital gain is worked out in the foreign currency and the conversion of the capital gain into Reais is based as at the date the account is totally encashed.
This amount should be included in a specific electronic form ‘Capital Gains in Foreign Currency’, in an Annual Tax Return. This form must be filed by the taxpayer for the accounting of the tax due. The tax must be paid before the last business day of the following month.
Tax on partial encashment
Tax would be payable upon each partial encashment proportionally to the capital returned. Any gain is subject to CGT.
Tax on death
As our account is a capital redemption contract (no lives assured), this is not applicable.
Tax on maturity
Where the account matures, the tax liability will be the difference between the contribution paid and the redemption proceeds.
Tax on advance payment (loan facility)
This would be taxed as a full encashment.
Transactions within the account
There is no tax on fund switching since there is no positive difference between the investment value on the date of the fund switching and the original value of the investment.
Wealth tax does not currently apply to Brazilian residents.
Pledge of the account
There is no tax on pledge of the account as there is no change in ownership.
Assignment of the account
The change of investor may be considered a liquidation of the investment for CGT purposes and therefore subject to CGT.
Payment to Brazilian resident beneficiaries
Where the owner of the account is an offshore trust and distributions are made to a Brazilian resident beneficiary, these payments are taxed as income and not capital gains.
All Brazilian taxpayers must file an annual tax return by the 30th April, reporting all the income that was earned in the previous calendar year. This return should include, as a general rule, all local or foreign assets.
The Brazilian tax authority has identified the Isle of Man as a tax haven. However, considering that the accountholder is not resident in the Isle of Man and is a resident of Brazil this will have no impact on the tax treatment described in this document or the ability of the accountholder to purchase a Old Mutual International account.
Law of the contract
The account issued by Old Mutual International will be governed by Manx law.
Investment risk and responsibilities
There are no investment guarantees associated with our funds and in particular there is no guarantee of the return of capital. We offer a range of funds with varying risk characteristics.
The value of the account is determined by the value of the units of the funds to which the account is linked. We accept no responsibility for the investment performance of the funds. The value of units of the funds will depend on the performance of the assets of the funds. The value of the units can fall as well as rise. It should be noted that units and bank deposits could, in exceptional circumstances, become valueless (this could either be temporarily because of suspension, or permanently). In addition, should any assets be denominated in a foreign currency, there will be risks and fluctuations in price due to changes in exchange rates.
Depending on the assets of the funds, there may be limits on the liquidity of the assets. In the event that there are problems liquidating any assets of the funds, the company may defer any transactions involving allocation, cancellation or fund switch until such time as we consider appropriate.
By requesting investment into a particular fund, or funds, the client accepts these investment risks.
It is for you and your client to decide which funds are most appropriate for their needs. We do not give advice.