What’s the Right Exchange Rate?

As if exchange rate fluctuations weren’t confusing enough, try calculating the value of foreign income when filing taxes in Brazil. You’ll have to list everything in reais, so what’s the correct exchange rate to use?

Well, it depends on what you’re reporting. Don’t just hop on Google and use any currency converter. You must follow specific guidelines from Brazil’s federal tax authority (Receita Federal) as well as the Brazilian Central Bank’s official exchange rates.

Let’s look at a few examples:

Say you’re reporting a checking account balance you have outside Brazil. The amount in reais is determined by using the Central Bank’s PTAX-Compra exchange rate on December 31 of the prior year.

Capital gains and interest, as well as salary and dividends, earned outside Brazil use PTAX-Compra too. However, they use different dates. Capital gains and interest are calculated based on the date they were earned. Salary and dividends are calculated as of the last business day of the first fortnight of the previous month.

If you purchased corporate bonds outside Brazil, you’ll use the Central Bank’s PTAX-Venda. The calculation is based on the date of purchase of the bonds.

Earnings in foreign currencies other than US dollars first need to be converted into US dollars. Then, you’ll have to go from US dollars to Brazilian reais.

If you’re paying taxes in Brazil, you’d be best advised to hire a Brazilian accountant or tax professional who’s familiar with reporting foreign income in Brazil. It’ll be well worth the investment.