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Social contribution on net profits increased for financial institutions

Tax Alert:May 22, 2015/Brazil

Provisional Measure 675/2015 (PM 675/2015), which increases the rate of the social contribution on net profits (CSLL) for financial institutions from 15% to 20%, was published in Brazil’s official gazette on 22 May 2015. The PM will apply as from 1 September 2015. (Tax Alert:May 22, 2015/Brazil)

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1. Social contribution on net profits increased for financial institutions

Provisional Measure 675/2015 (PM 675/2015), which increases the rate of the social contribution on net profits (CSLL) for financial institutions from 15% to 20%, was published in Brazil’s official gazette on 22 May 2015. The PM will apply as from 1 September 2015.

The CSLL was established in 1988 by Law 7.689/1988, at an initial rate of 9%, calculated on pretax profit of legal entities. In 2008, in the midst of the global economic crisis, Law 11.727/2008 increased the CSLL rate applicable to financial institutions to 15%, while the 9% rate remained in effect for legal entities in general.

2. PIS/COFINS exemption on certain financial income reinstated

The Brazilian government enacted a decree on 20 May 2015 (Decree 8,451/15) that reinstates the exemption from PIS/COFINS (social security contributions on revenue) on certain financial income arising from the fluctuation of foreign exchange rates. Decree 8,451/15 amends a decree issued on 1 April (Decree 8,426/2015) that reinstated the PIS/COFINS on financial income, including income derived from hedging transactions, for taxpayers under the “noncumulative regime,” at rates of 0.65% and 4%, respectively; such income had been exempt since April 2005. The new rates were to apply as from 1 July 2015.

 

>> Click for Japanese [金融機関等に対するCSLLの料率引上げ ほか]

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