Brazil offshore tax amnesty signed into law

Residents of Brazil with undeclared offshore assets can now voluntarily declare and regularise their tax affairs without facing criminal prosecution and only face a one-off charge and penalty.

All individuals and legal entities who were resident or domiciled in Brazil on 31 December 2014, can voluntarily declare previously undisclosed goods or assets, provided they were obtained legally, according to the Society of Trust and Estate Practitioners (STEP).

Applicants must provide the Federal Revenue Bureau with a single declaration setting out detailed descriptions of the assets and their value.

Penalty

A one-off income tax charge of 15% will be levied on the value of the reported assets, together with a 15% penalty. When first tabled in July 2015, the bill proposed a fine of 17.5% in addition to income tax charged at 17.5%.

After some negotiation the legislation passed the House of Representatives in November by 230 votes to 213.

The payment will be considered a definitive settlement of the tax debt. Taxpayers who have already paid towards their tax obligations will not be reimbursed.

“It is certain that, once the [international] tax information exchange programmes start, the Federal Revenue Bureau will spare no effort to repatriate irregular assets abroad, including by means of criminal prosecutions.”

The Special Regime for Exchange and Tax Regularisation (RERCT) was signed into law on 13 January 2016. The government estimates that there could be as much as BRL400bn (£69.3bn, €90.7bn, $98.9bn) in undisclosed assets held overseas.

Door is closing

The amnesty will close 210 days from law’s enactment. However, taxpayers will not be able to submit declarations until the Bureau has issued regulations setting out details of the disclosure procedures, according to Marco Queiroz of law firm Andersen Ballão Advocacia.

“This opportunity must not be wasted by taxpayers in irregular situations,” said Queiroz. “It is certain that, once the [international] tax information exchange programmes start, the Federal Revenue Bureau will spare no effort to repatriate irregular assets abroad, including by means of criminal prosecutions.”