The topic here appears LIKE something from another world but it is not.
If you are already an investor in Brazilian financial assets like stocks, real estate funds and fixed income, you MUST consider these investments also abroad and I will explain some reasons to do so.
Brazil has 200 million inhabitants, of which a little more than 500 thousand are in bovespa, which gives 0.25% of the population, some 700 thousand also invest in the Treasury Direct. Of these 500 thousand people who invest in the stock market, THE BIGGEST MAJORITY invests through expensive funds and/or through banks, and they are not even aware of what they are buying, nor the fees and assets that make up the funds.
Finally, we have a minority’s minority that has a brokerage account and chooses its assets one by one, makes its allocation among fiis, fixed income and shares and takes the reins of its own financial life, avoiding expensive intermediaries and knowing what it is doing. One of the goals of this blog is to inform and discuss a bit with the minority that seeks a little more refined knowledge, and now we go a little further, the subject is vast, but it’s nothing out of this world.
First, let’s consider some things:
1 – The world has more than 200 countries. Why do you invest in ONLY ONE?
2 – The whole bovespa represents less than 5% of the capital of companies listed on stock exchanges, and of these, only 40 are not bad.
3 – Brazil, as we all know, is a corrupt country, underdeveloped, with no human resources, with HIGH TAXES (for individuals and corporations), high tax burden, slowness of court, fragility in agreements and contracts, high political interference, political instability Eternal, monetary fragility, high inflation, dependence on commodities to close the accounts (commodities are cyclical), greedy growth, high stock market volatility and many other things that you know.
4 – Consider a future retirement in various currencies and countries, with varying incomes and perhaps a future emigration. (If things get worse here)
5 – As your wealth grows the more interesting protection gets (and over time it will grow EVEN).
6 – With the computerized world you can invest abroad without leaving the country safely, you can read reports and follow companies as far away as Japan or New Zealand, just like you do here.
7 – It is prudent to have reasonable English to understand texts and company reports.
8 – You do not have to keep updating all the time, or kill yourself by choosing and focusing on market news. There are passive strategies.
9 – ETFs abroad are gigantic, extremely diversified and of very low maintenance cost. An EXCELLENT OPTION to invest outside without major hiccups.
10 – It is part of the risk control: imagine a Venezuelan who invested a lot in Venezuela in the last 40 years. Would he be happy now to see all the companies in the country turning to dust or being nationalized by the dictatorship? And in Argentina? I’m not saying that Brazil will follow this path, but ANY COUNTRY can get worse, and VERY. Look at Greece that is an EUROPEAN country and nowadays it is fucked in the hands of communists. Spain, Portugal, and Italy are also fucked. Italy is the next Greece of the time.
11 – You can buy ETFs of stock, REITS, Fixed Income (from governments and companies – the so-called BONDS) [Fixed income can be called Fixed income or simply BONDs] – To tell you the truth, I do not think the bonds are so attractive Abroad but I’ll talk about it later.
12 – REITS (Real State Investment Trust) are like real estate funds here in Brazil, quotas on a gigantic real estate like hotels, casinos, hospitals, universities, shopping centers, malls, office buildings, farms, or even residential. There are REITs in several countries to buy USA, Canada, UK, Singapore, Australia, Germany … among others.
13. Do not think of NOW, think ahead, think in 15-20 years, how would you have an extremely diversified and profitable asset dripping from all that is in different currencies, think you did everything possible to protect your assets And diversified as much as he thought prudent.
14 – Over the years, ANY GOVERNMENT OF BRAZIL, CAN HARD MUCH to your money shipment EXTERIOR, or even BAN or tax ABUSIVELY. Remember we are hostages of our government. Government (whether of any party) is ALWAYS the PROBLEM and never the SOLUTION. Every government is thirsting for power and money, the more the better (for them), and the only way for it to WIN is to withdraw MONEY AND POWER from you.
15 – Approximately 50% of Brazil’s GDP is already STOLEN by the Brazilian government, and theft only increases. The Brazilian government only increases spending, grows and robs us MORE with each passing day, remember that TAX IS THEFT. Theft is something they take away from you without your consent, especially here that YOU HAVE A MEDIUM RETURN of your taxes, it is not like a Sweden or Canada that the government is a little more organized and less thieving.
16. TAXATION – This is the MAIN TOPIC OF THIS POSTING – PAY ATTENTION –
Undoing the myth of “dividend taxation” abroad.
LESSON NUMBER ONE – You will have to pay Income Tax (IR) – here for the Brazilian government – on ALL YOU receive abroad, dividends of shares, REITS, and bonds. The maximum IR you will pay is 27.5%, in some countries we have reciprocal agreements and liquid will drop for you.
Aaahhh Frugal, I do not want no, better to invest here even though I am EXEMPT FROM GOING on DIVIDENDS and on Real Estate Funds.
SAME? Pay attention here! Do you think you found a gold mine? Do you think you see what NOBODY sees most? Do you think markets do not know that? Do you think this is an exemption for free? Tell me seriously, little Padawan, ARE YOU FREE LUNCH on your dividend receipts from BOVESPA companies? You think Brazil is the Holy Grail of investments because it ALWAYS does not tax your dividends (yet? – it may get worse, MORE).
I have a very interesting link from a WORLD BANK study. The link shows TOTAL TAX CHARGE on top of corporate profits in several countries. And guess what, one of the GREATEST corporate champions stolen? That, Brazil.
TOTAL TAX TAX ON PROFITS, BY COUNTRY.
I saw today this message from a user in Bastter.com who posted the spreadsheet and made the comment (I do handle NOTHING of excel).
“The columns represent how much of the company’s business profit stays with you according to the payout (from 100% to 0). In the case of Brazil, the World Bank study (I think it is with PWC) concludes that an average industrial company pays 69% of its income tax between IR, CSLL and other labor and social charges. As a Brazilian does not pay direct dividend tax, it means that you get 100% – 69% = 31% of profit regardless of the payout.
For some countries the account changes, because there you pay a dividend tax and you pay tax when the money falls into your account here. An example is South Africa: 28.8% of corporate profit goes away in charges. So they left 71.2%. If the company distributes everything, you will pay 15% of dividend tax and 12.5% of IR here in Brazil (there is a double taxation agreement). If you retain all, you will not pay taxes and the company can apply the 71.2% of it to your business (and theoretically grow your profit).
The worksheet is just the automated version of the above account (cell J3). I know this is just a generic study because larger companies can find ways around the tax code, but still surprising as Brazil punishes business in general. “”
Remembering that, on the outside, how much THE PAYOUT MAJOR, THE MORE TAX YOU PAY.
In Brazil, the payout is “pay no tax”.
The TOTAL tax burden on top of corporate profits in Brazil is 69% !! SIXTY-NINE PERCENT. Write that down. 69%! According to this study by PWC and the World Bank.
If you are an entrepreneur, trader or at least work in financial with taxes you know very well what it means:
IRPJ, PIS, COFINS, Social Contribution, ICMS, ISS, IPI, taxes to import and export raw materials, final products, ISLL, FGTS, INSS, taxes on employees’ Etc … etc … etc … They must have more that I do not remember now and/or nor have the total knowledge, these taxes are always being pressed up by the thief government, or else they create new taxes, like IOF, CPMF …
What I want you to know is: THERE IS NO PROMOTION IN INVESTING IN BRAZIL! Neither in the bovespa with “exempt dividends”. ARE NOT EXEMPT! There’s a tax bundle before the money’s left for you! What remains is the rest of the rest and the taxes have already been taken BEFORE the end of the broth of the floor cloth that is called little profit arrive at you.
If you had PROMOTION to invest here, ALL THE MONEY IN THE WORLD WOULD BE HERE, FOR EVERY WORLD LIKES TO PROMOTE.
Let’s go ahead, if you clicked on the link from the World Bank study and started to crash I’ll give you an example (here’s the link again, click and see).
Of the 100 $ a company makes in Singapore, the government there steals “only” 19.4 $.
There are more than 81.6 million euros for the company (reinvest, repurchase shares, pay dividends, grow).
If the company wants to pay 50% “IR” dividends of 27.5% to you, it will pay 81.6 / 2 = 40.8 $ in total.
Those 40.8 are gross, so you’re going to have to multiply by 0.725 to see how much liquid in your hand is all right inside the law.
Hence 40.8 * 0.725 = 29.58 CLEAN AND LEGALIZED money in your hand.
Of every 100$ that a company earns in Brazil, the government here steal 69 $ in total (it does not matter if before or after the billing, that was the tax burden of it).
There are 31 $ left for the company (reinvest, repurchase shares, pay dividends, grow).
If the company wants to pay 50% in “IR exempt” dividends to you, it will pay 31/2 = 15.5 $.
Payout 50% in Brazil of 100$, the government robs 69%, the company gets 31$ x 50% = you will take 15.5 $ “without having to pay IR on the dividends”.
For the same PAYOUT and total tax cost on the profit, 100$ in a Singapore company will turn into 29.58$ in your hand, EVEN PAYING THE TAX ON DIVIDENDS and if it is a Brazilian company it is ONLY with 15.5 MONEY In your hand WITH YOUR “GOING OUT” DIVIDENDS what a joke. Another bigger JOKE is still coming and going a group of politicians LEFT CHANNEL STILL WANT TO TAX THE DIVIDENDS IN BRAZIL. Being that they are LITTLE SANDING that almost did not SURROUND ANYTHING to turn dividends. And friends, in a 30-year horizon, WITH THE QUALITY OF THE POLITICIANS WE HAVE, do you really think that this is NEVER going to happen?
In addition to being easier to operate a company in Singapore, fewer laws, better human resources, better logistics, lower taxes, speed, efficiency, softer and more flexible labor laws, more tax and operational effectiveness is even more costly for you to invest in. To invest right here. If it is a low payout company then, ZERO kinds of payout and dividends, it will get 81.6 monies to REINVEST IN THE SAME and grow even more, in Brazil even if SHE WANTS, does not give why the government will STEAL 69% , At most she’ll be left with 31% for her to stay for herself or pay dividends. This is our sad reality. I spoke Singapore just as an example but in this photo, we can see how they would be in other countries too.
So you see in the media that our companies are not competitive, they are not global, they do not grow, they do not expand all over the world – IT’S CLEAR! THE GOVERNMENT STOLE ALL THE COMPANY! How will it grow? This is all for you to understand how the government of Brazil MASSACRATION our companies and therefore MASSACRATION the minority shareholder.
Did you realize the TAX EFFICIENCY of investing outside? For the simple fact that companies are not as plundered as ours, we have already won a lot. Another thing, you DO NOT NEED to bring the money back NEVER AGAIN, you can use a credit or debit card or simply withdraw your money from abroad here at any ATM.
The post is already a bit big. In the next posts, I will talk about investments in some specific countries and how we little mortals we can do to operationalize this in the most rational, safe and cheap way possible. Do not fear the so-called “taxable dividends abroad” that’s all bullshit. The legend of dividends “exempt” in Brazil has to fall by land.