Please be informed that until July 31st, 2017 the Country-by-Country Report related to the fiscal year of 2016 shall be presented.
The Country-by-Country Report is a yearly report by means of which multinational groups shall provide to the tax authorities of the jurisdiction where the ultimate controller is based various information about their global operations, location of their activities, global allocation of income and taxes paid and due, as well as all members of the group and the activities they perform.
Follow below a summarization of the main features related to the Country-by-Country Report in Brazil:
1. Basis. The Country-by-Country Reporting requirement in Brazil derives from the Normative Instruction of the Brazilian Federal Revenue (IN/RFB) no. 1,681, as amended by the IN/RFB no. 1,709, that was published to implement one of the commitments of Brazil in relation to the Country-by-Country Report provided by Action 13 of the Base Erosion and Profit Shifting Project (BEPS), coordinated by OECD – Organization for Economic Co-operation and Development, with the scope of dealing with measures to fight tax avoidance upon artificial shift of profits to low or no tax locations (http://www.oecd.org/tax/beps/).
2. Who shall provide the Country-by-Country Report. The following entities, including independent business unities and permanent establishments, as further defined by the IN/RFB no. 1,681, are obliged to present such report:
(i) entities based in Brazil for tax purposes that are ultimate controllers of multinational groups whose consolidated revenue is higher than R$ 2,26 billion in the previous fiscal year (2015);
(ii) entities based in Brazil for tax purposes that are members of multinational groups (“member entities”) whose consolidated revenue is higher than 750,000,000.00 (or the equivalent converted by the rate on January 31st, 2015 of the local currency in the tax jurisdiction of the ultimate controller), and that although not being the final controller of such multinational groups, fit in at least one of the situations below:
a) the final controller of the multinational group of which the entity is a member is not obliged to present the Country-by-Country Report in the jurisdiction where it is based for tax purposes, according to list of “Signatories of the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports” provided by OECD (http://www.oecd.org/tax/beps/CbC-MCAA-Signatories.pdf);
b) the tax jurisdiction of the ultimate controller has entered into an international agreement with Brazil, but there is not any agreement of competent authorities with Brazil until the final deadline for the presentation of the Country-by-Country Report; or
c) the tax jurisdiction where the ultimate controller is based has failed to comply with the duty of automatic exchange of information with Brazilian fiscal authorities (jurisdictions with systemic failure).
3. Who is released from presenting the Country-by-Country Report. The following entities are released from the presentation of the Country-to-Country Report:
(i) Entities based in Brazil for tax purposes that are members of Multinational Groups whose total consolidated revenue in the fiscal year preceding the fiscal year to be considered in the report as reflected in the financial statements of the ultimate controller, is inferior to:
a) R$ 2,260,000,000.00, if the ultimate controller is based in Brazil for tax purposes; or
b) € 750,000,000.00, or the equivalent converted by the rate on January 31st, 2015 of the local currency in the tax jurisdiction of the ultimate controller.
(ii) Even if they fit in the situations described in tem 2, (ii) above, member entities based in Brazil for tax purposes in case the multinational group’s declaration has been provided by a substitute reporter entity that meet some criteria regarding its jurisdiction and the conditions under which information have been provided.
In case of release from the presentation of the Country-by-Country Report, member entities based in Brazil for tax purposes shall inform RFB that they fit in the conditions listed above for such release.
4. Deadline for the report. The Country-by-Country Report shall be presented yearly and shall refer to the immediately preceding year. The report that refer to the year 2016 shall be provided up to July 31st, 2017.
5. Delivery and information to be provided. The Country-by-Country Report shall be presented upon the filling in the new Section W fields of the Fiscal Accounting Bookkeeping (ECF) and its transmission to the Public System of Digital Bookkeeping (Sped), as provided by IN/RFB nº 1.422/2013.
In case a Brazilian entity member of a multinational group is not the ultimate controller or substitute reporter of the group, it shall provide information such as: i) name of the multinational group; (ii) name of the ultimate controller, including its country /jurisdiction for tax purposes and its tax identification number; and (iii) identification of the entity in charge of presenting the Country-by-Country Report.
In case the Brazilian entity member of a multinational group is the ultimate controller or substitute reporter of the group, besides the data listed above, it shall be provided more detailed information, such as but not limited to: i) identification of each entity member of the multinational group and the corresponding tax jurisdictions; ii) consolidated revenue, discriminating revenue related to related parties and third parties; iii) profit or loss before taxes; iv) tax paid over income; v) tax due over income; vi) total amount of corporate capital; vii) accrued profits; viii) total number of employees; ix) tangible assets different of cash and equivalent to cash; etc.
6. Penalties. The member entity based for tax purposes in Brazil that fails to timely present the Country-by-Country Report within the term provided by the applicable law or that presents it with errors or omissions may be ordered to present it or to provide clarifications to the Brazilian fiscal authority, and shall be subject to the following fines:
(i) in case of delay:
a) R$ 500.00 (five hundred reais) per month, in case it is starting activities or if it has assessed presumed profit in the latest ECF presented; or
b) R$ 1,500.00 (one thousand five hundred reais) per month in any other situation.
The fines mentioned above shall be reduced by half when the Country-by-Country Report is presented before any ex-officio procedure is initiated by the Brazilian fiscal authority.
(ii) in case of failure to answer to the order of the Brazilian authority to present the Country-by-Country Report or to provide clarifications:
• R$ 500,00 (five hundred reais) per month.
(iii) in case of omission or presentation of inexact or incomplete of information:
• 3% of the omitted, inexact or incomplete amount, never inferior to R$ 100.00 (one hundred reais).
Araújo e Policastro team remain at your disposal for any necessary clarification and to assist you in connection with the measures necessary to present the Country-by-Country Report.