February 14, 2004 | By Keith Martin in Washington, DC

BRAZIL discouraged foreign investors from using offshore holding companies in tax havens to make inbound investments into Brazil.

Foreign investors must pay a capital gains tax of 15% when selling off investments in the country. The tax is withheld by the buyer. However, if neither the seller nor the buyer is a Brazilian resident, then responsibility for collecting the tax is imposed on the person acting in Brazil as attorney-in-fact for the buyer.

The tax rate has now increased to 25%, effective January 1, on gains earned by sellers who are residents of “low-tax jurisdictions.”

It is not a good idea to own Brazilian investments directly from a tax haven as exiting from the investment will be more expensive.