Emerging Markets Rates and Currencies Handbook

hedging transaction to be tax deductible. • Losses in offshore OTC derivatives entered by Brazilian companies with offshore counterparties are not deductible (only derivatives traded directly through an offshore exchange are deductible). • NDF, forwards and options are subject to 0.005% withholding tax, deductible from the 15% income tax to be paid by the company directly. Swaps and other fixed-income-like instruments follow a regressive WHT schedule: Maturity: Up to 180 days, WHT: 22.5% Maturity: From 181 to 360 days, WHT: 20.0% Maturity: From 361 to 720 days, WHT: 17.5% Maturity: Above 720 days, WHT: 15.0% Both markets are connected but have different terms, pricing, liquidity, documentation Settlement. • Off-shore NDF is net settled in USD, fixing rate is EMTA (Emerging Markets Traders Association). • On-shore NDF is net settled in BRL, fixing rate is the PTAX. Spot liquidity is concentrated in the onshore market; local market also allows for longer tenors (> 5 years) Citi Brazil 1.111 Paulista Avenue Zip Code 01311-920 Sao Paulo, Brazil FX Sales Contact: +5511 4009 2666 CSG Sales Contact: +5511 4009 3273 CCB Sales Contact + 5511 4009 2002 Tax Summary – Brazil Brazil W/H Tax • 25%WHT for tax haven domiciled lender • 12.5% WHT for Japan domiciled lender • 15% WHT other jurisdictions • Under certain other tax treaties rate is reduced • Pre-export financing exempt • 25%WHT for tax haven domiciled lender • 12.5% WHT for Japan domiciled lender • 15% WHT other jurisdictions • Pre-export financing exempt • No WHT • Onshore: • - Swaps: 15%–22.5% w/h tax, depending on the term of the investment • - NDFs / Futures & Options: 0.005% over premiums/adjustments in anticipation of final 15% • - Offshore: No WHT • 25%WHT on capital gains for tax haven domiciled investor • 15% other jurisdictions on capital gains • Dividends exempt Deductibility of (FX) Losses • Fully deductible • Onshore: Losses deductible only for hedging transactions • Offshore: Losses are not deductible, unless trade done on an exchange • N/A Country Tax Deductibility and Considerations Inter-Co Debt Offshore Derivatives Equities Bank Loans Offshore Local Borrowing