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Brazil's offshore tax amnesty signed into law

Monday, 18 January, 2016

Brazil's president has signed into law a bill offering an amnesty to owners of undeclared offshore assets in return for a one-off tax charge and penalty.

Law No.13254/2016, Implementation of Special Regime for Monetary and Tax Regulation (RERCT), was enacted on 13 January. All individuals or legal entities that were resident or domiciled in Brazil on 31 December 2014 can voluntarily declare previously undisclosed goods or titles of any kind, provided they were legally obtained in the first place. They can also amend inaccurate or incomplete previous disclosures without being prosecuted, note Ana Luiza Martins and Celso Grisiof of São Paulo law firm Tauil & Chequer.

Applicants for the so-called special regime amnesty must provide the Federal Revenue Bureau with a single declaration setting out detailed descriptions of the relevant assets in possession before 31 December 2014 with an indication of their value in Brazilian real (BRL). If assets affected are BRL100,000 or over, the participation of a financial institution is required, says Mariana Oiticica of BTGPactual in São Paulo.

A one-off income tax charge of 15 per cent will be levied on the value of the reported assets, together with a penalty of the same amount (so 15 per cent income tax + 15 per cent fine). The payment will be considered a definitive settlement of the tax debt, and taxpayers who have already paid something towards their tax obligations will not be reimbursed.

According to Oiticica, 'Taxpayers can regularise anything and there will be no prosecution or investigation so long as (broadly) it doesn't relate to corruption or drugs (there is a list of 'predicate offences' which are whitewashed); you don't need to demonstrate origins of the funds with documents, but you have to tell the story; the only documentary proof required is the bank statement as at end 2014.'

The amnesty will close 210 days from the law's enactment by the Federal Revenue Bureau. However, taxpayers will not be able to submit declarations until the Bureau has issued regulations setting out details of the disclosure procedures, said Marco Queiroz of law firm Andersen Ballão Advocacia. 'This opportunity must not be wasted by taxpayers in irregular situations', commented Queiroz. 'It is certain that, once the [international] tax information exchange programs start, the Federal Revenue Bureau will spare no effort to repatriate irregular assets abroad, including by means of criminal prosecutions.'

Sources