Costs of Trading on the Brazilian Stock Exchange
The Brazilian stock market is the biggest in Latin America and plays an important role globally. This article will show all the fees and taxes that investors need to pay in relation to this.
There is, currently, only one stock exchange in Brazil: BM&F Bovespa. This institution was officially created in 2008, after the merger between BM&F, founded in 1986, and Bovespa, that acquired the current form in 1960. The first one was a stock exchange of derivatives, and the second one, of shares.
Nowadays, BM&F Bovespa is the leading institution of its type in Latin America, having finished the year of 2013 with a market value of BRL 2.41 trillion. With this amount, the Brazilian stock exchange figures among the 15 largest stock exchange markets in the world.
BM&F Bovespa is headquartered in the city of São Paulo, and also has offices in the United States, China, and in the United Kingdom.
Costs of doing business in the stock exchange
Buying assets and derivatives is not only about paying for each share. There are various fees and taxes that can be charged, related either to the brokers, the government, or the stock exchange itself. If you are planning to enter the Brazilian stock market, prepare to afford the costs below.
The safe custody fee is charged by the stock broker over the maintenance of the assets under their care, covering operational costs. Some Brazilian brokers prefer not to charge this fee if the client realizes a certain number of operations per month.
This fee might be:
- Fixed - charged every month, independently from the number of operations realized or assets owned. Usually varies from BRL 6 to BRL 50, according to each broker.
- Variable - calculated on top of the shares under the broker's care, generating a percentage that must be paid monthly. This percentage is, usually, not bigger than 0.015% per month.
This fee is charged by brokers based on each operation made, either on the purchase or selling of shares. The stipulated fee or rate may vary according to the type of market, operation, and tools offered by each broker, and even if the operation is made via home broker or trading desk.
The fee can be:
- Fixed - used mainly when the operations are made via home broker - online - and can be more advantageous if a large investment is made.
- Variable - usually follows the Bovespa Chart, where brokerage fees are listed according to the value of the operations made. It can be more advantageous for smaller investments, since applications up to BRL 135, for example, have a fee of BRL 2.70.
This category involves several fees and corresponds to rates charged for each operation by BM&F Bovespa and the Brazilian Company of Settlement and Custody, which acronym is CBLC.
These fees vary a lot, according to factors like operation type, profile of the investor, and value of the operation. Since an average would be too inaccurate, the best thing to do is to check the BM&F Bovespa chart.
The main fees and their equivalents in Portuguese are:
- Negotiation Fee (taxa de negociação)
- Settlement Fee (taxa de liquidação)
- Registration Fee (taxa de registro)
Financial operations are taxed, as many other operations related to handling money. The ones that usually bring more worries to investors are Tax on Services of Any Nature (ISS) and Income Tax (IR).
- ISS - charged over the brokerage services and varies according to the municipality where the broker is located, and ranges between 2% and 5%.
- IR - both individuals and companies must pay this tax, which is charged over the net income resulting from operations in the stock exchange. Individuals that sell up to 20,000 shares per month in the spot market are exempt.