GENERAL GUIDELINES. Annual Income Tax Return DIRPF And Declaration of Brazilian Capital Located Abroad CBE. Fiscal-year 2017 Calendar-year 2016

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1 GENERAL GUIDELINES Annual Income Tax Return DIRPF And Declaration of Brazilian Capital Located Abroad CBE Fiscal-year 2017 Calendar-year 2016

2 Fiscal-year It refers to the year when the tax return (DIRPF) must be filed with the Brazilian IRS. Calendar-year It refers to the year when the facts described in the tax return (DIRPF) effectively occurred. The filing of the Brazilian income tax return (DIRPF) takes place in a given year, but it refers to facts from the previous year. That is the reason why the DIRPF to be presented now in 2017 must report information regarding facts that happened during the calendar-year of 2016, in other words, from 01/01/2016 to 31/12/2016.

3 I - Individuals who were fiscal residents in Brazil in 2016 that fit one of the following situations have to file a Brazilian income tax return (DIRPF): 1. Individuals who received taxable income in Brazil and/or overseas, which total is higher than R$ 28,559.70, such as: employment income, non-employment income, retirement income, pensions, rental income, etc.; 2. Individuals who received tax exempt income (non taxable income or income with taxes withheld at source) in Brazil and/or overseas in an amount higher than R$ ,00; 3. Individuals who have realized capital gain on the sale of assets or rights in Brazil and/or overseas, when taxable; 4. Individuals who performed any transaction in the Stock Market, goods, futures, etc; 5. Individuals who held on 31/12/2016, rights and assets, in Brazil and/or overseas, which total is higher than R$ ,00;

4 I - 6. Non-resident in Brazil (Brazilian or foreigners) who became fiscal resident in Brazil in 2016 and kept such status until 31/12/ With reference to Rural activities: Individuals who received gross income higher than R$ ,50; Individuals that want to offset, in the calendar-year of 2016 or in the forthcoming year, loss from previous years or from calendar-year of Individuals who could claim for tax exemption on the capital gain related to the sale of a residential house/apartment, by using the sale price received to purchase new residential houses/apartments in Brazil, within a 180-day period counted as from the date of the sale contract as established by Brazilian law (art. 39 of Law from 21 de November 2005). The person who fits in any of the situations aforementioned will not have to file a separate tax return if such person is listed as a dependent in someone else s tax return, with all of his/her income, assets, rights and debts also declared.

5 II - Forms 1. Complete Model CLAIMING LEGAL DEDUCTIONS This option allows the individual to claim any/all legal deductions regarding expenses that can be proved (proof of payment/receipt), up to their legal limits, such as: medical expenses, education expenses, Social Security contributions (INSS) paid on behalf of domestic employees, private pension plans contributions in Brazil (PGBL), etc. 2. Simplified Model CLAIMING A STANDARD (SIMPLIFIED) DEDUCTION This option allows the individual to claim an automatic discount of 20% of the taxable income reported in the tax return, up to R$ ,34, without being subject to proof, instead of claiming any legal deductions. This option is recommended to individuals that have expenses lower than 20% of their annual taxable income, achieving a better tax benefit. ATTENTION Any tax resident can claim the simplified deduction. Changing the model of the tax return (complete or simplified) is allowed only if the amendment is submitted until the filing deadline (April 28th, 2017). After such date, it is not possible to amend the tax return in a different model than the original one delivered to the Brazilian IRS.

6 III - to File the Tax Return The period to file the DIRPF 2017 starts on March 2nd and ends on April 28th, Extensions are not allowed. Tax returns filed after the filing deadline will be subject to a penalty of 1% based on the annual tax liability of the tax return, provided that the minimum amount is R$ 165,74 and the maximum penalty charged is 20% of the tax liability.

7 IV - Progressive Tax Table Annual Progressive Tax Table Calendar year 2016 Income Range (R$) Tax rate (%) Standard discount (R$) Up to , From ,77 to ,80 7, ,58 From ,81 to , ,57 From ,61 to ,16 22, ,51 Higher than ,16 27, ,32

8 IV - Legal Deductions Deductible Expenses Deduction from the base of the tax due Direct Deduction to the tax due Type of Expense a. Dependents (Brazilian IRS started to demand CPF for dependents since age 12) b. Education expenses in Brazil and/or overseas with yourself or with dependents c. Medical expenses in Brazil and/or overseas with yourself or with dependents d. Alimony expenses according to legal decision or settlement recognized by the Brazilian Court Deduction ceiling R$ 2.275,08 per dependent R$ 3.561,50 per individual 100% deductible, except the amount reimbursed by the health insurance plan, if applicable. Payments in order to keep health plans abroad are not deductible. 100% deductible e. Private Pension Plan PGBL and FAPI Up to 12% of the taxable income reported in the tax return f. Donations made directly to the Up to 6% of the tax due municipal/state/federal council funds of children and teenager rights, culture incentive and sports incentive. g. Social Security contributions (INSS) on behalf of domestic maid Up to R$ 1.093,77

9 V - Declaration of Assets, Rights and Debts Individuals required to file a DIRPF must report the balances of their assets, rights and debts in Brazil and/or overseas on December 31st, 2015 (or on the date that he/she became a fiscal resident) and on December 31st, Assets, rights and debts eventually acquired and sold during 2016 also need to be reported. It is not necessary to report: Bank accounts and financial applications with balances under R$ 140,00 as of 31/12/2016; Assets and rights that have been bought for less than R$ 5.000,00 (except cars, ships and airplanes); Shares from a company negotiated or not in the Stock Market, as well as gold and financial assets and rights that have been acquired for less than R$ 1.000,00; Debts with balance equal to or lower than R$ 5.000,00 on 31/12/2016.

10 VI - Declaration of Brazilian Capital Located Abroad 1. Period for submission The delivery period starts on February 15th and ends on April 5th, Amendment of the Declaration Before the deadline to submit such declaration, it is possible to amend it without any penalties. 2. Obligation to submit such Declaration Tax residents in Brazil that on December 31st, 2016 held at least US$ 100, (one hundred thousand US Dollars) in assets and rights overseas. Besides that, tax residents in Brazil who have assets and rights overseas in total higher than US$ 100,000, (one hundred million US dollars) have to submit such declaration on a quarterly basis. 4. Penalties This declaration (CBE) does not have any taxation purpose. However, not reporting the information required by the Central Bank; or reporting false/incomplete information; or not meeting the delivery deadline may trigger penalties to the individual that can reach R$ ,00, according to art. 1º of Brazilian rule MP 2.224/2001.

11 VI - Declaration of Brazilian Capital Located Abroad Online filing This declaration can only be prepared and submitted via the Brazilian Central Bank website. It will remain recorded in the Central Bank systems and protected by a password. Assets and rights to be reported: Commercial Credit: loans between exporter and importer Overseas deposits: saving and checking accounts Derivative: Future / Term / Swap Derivative: Options Loans and Financial Leasing Direct Investments Other Investments Portfolio: Brazilian Depositary Receipts (BDRs) Portfolio: Partnerships Portfolio: Debt securities

12 Reach out to us! Odair Silva Tax Partner T (office) E odair.silva@br.gt.com Pamela H. Borges Director GMS T (office) E pamela.borges@br.gt.com Estevão Vieira Supervisor GMS T (office) E estevao.vieira@br.gt.com Grant Thornton Brazil is structured to provide tax assistance and advice to Expatriates and Individuals regarding their tax obligations in Brazil, besides other consultancy services offered by Global Mobility Services and Tax area. Grant Thornton Brazil is a member firm of Grant Thornton International, which offers a broad range of services including audit; tax, labor, and business consultancy services; corporate finance; and outsourcing for private companies and government companies headquartered in Brazil or abroad. Grant Thornton Brazil is known in the market as a specialist in middle market. Grant Thornton has more than 1,100 employees who work for excellence in serving and in providing services to clients and partners. We believe in your company s instinct for growth. /GrantThorntonBrasil /company/grant-thornton-brasil

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