Artigos e Alertas
Exemption from Individual Income Tax on equity sales’ capital gain: General Attorneys’ Office is authorized to waive appeals
On June 21, 2018, the Ministry of Finance approved SEI Opinion No. 74/2018, of the General Attorneys’ Office (“PGFN”), which dismissed the National Treasury prosecutors from contesting or appealing (and also authorized the withdrawal of ongoing appeals) in all the judicial proceedings regarding the acquired right for exemption of Individual Income Tax (“IRPF”) on capital gain earned on equity sale, granted by Decree-Law no. 1,510 / 1976 and revoked by Law no. 7,713 / 1988.
Decree-Law no. 1,510/1976 guaranteed the exemption from income tax on the capital gain due by individuals, in the disposal of equity held for at least five years. In 1988, the exemption was revoked by Law 7,713/1988, and taxpayers who held a corporate interest for five years or more, prior to the revocation of the exemption rule, judicially claimed their right to exemption based on acquired right.
The jurisprudence of the Superior Courts pacified the understanding that taxpayers who had a corporate interest, without change of ownership for more than five years before the enforcement of Law 7,713 (ie more than five years before December 31, 1988), are benefited with the exemption from IRPF on the capital gain earned on the equity sale.
With the approval of SEI Opinion No. 74/2018, the PGFN prosecutors are not obliged to contest or appeal in lawsuits where the application of the exemption mentioned above is discussed, what should accelerate the judgement of the proceedings on the matter.
However, PGFN prosecutors are not exempt from appealing and contesting in cases where there is relevant grounds for defense or stock bonus after December 31, 1988, even with the capitalization of profits or profit reserves.
Taxpayers who meet the requirement for exemption – that is, hold equity interest from before 12.31.1983 until 31.12.1988, at least – should seek their legal counsel to confirm their right to exemption from capital gain in the sale corporate interest.
Candido Martins is available for any clarification on the subject.