New opportunity for Brazilian Taxpayers to voluntarily disclose assets kept abroad which have never been declared or have been previously declared with mistaken data to the Tax Authorities.
On April 03, 2017, Normative Instruction No. 1.704/2017 was published in the official gazette in order to regulate Law No. 13.428/2017 and the re-opening of the deadline for taxpayers’ adhesion to the Brazilian Amnesty, the so-called Special Regime for Monetary and Tax Regularization – RERCT.
In a nutshell, the regime´s deadline re-opening brought up the following innovations vis-à-vis the 2016 round:
• The regime´s scope was extended in order to comprise existing/consumed assets until June 30, 2016, which is also the new reference date for the applicable exchange rate (necessary for the conversion of the assets value into Reais – R$ 3,2098);
• The 100% fine imposed over the total tax assessed – which remains calculated under the rate of 15% of the total assets’ value – was increased to 135%, totalizing a nominal taxation rate of 35,25%;
• The taxpayers which adhered to the first round of the Brazilian Amnesty in 2016 may amend their statements (the so-called “DERCAT”) in order to include any assets omitted. The new assets included shall be subject to taxation under the new rules (15% tax + 20,25% fine = 35,25% total taxation);
• The income and other gains received by taxpayer after July 1st, 2016, shall be subject to regular taxation without application of fines in case they are disclosed until the deadline for the regime´s adhesion (July 31st, 2017) or until the deadline for the regular filling of the taxpayer´s annual tax return form, prevailing whichever is the later;
• The scope of the regime was extended to the estate of the deceased whose succession is considered opened until the date of the effective adhesion, which shall be performed until July 31st, 2017;
• In case the taxpayer presents mistaken data concerning the disclosed assets’ value, the differences accrued shall be subject to tax assessment by the fiscal authorities and the taxpayer shall be granted 30 (thirty) days from said assessment notice to perform the full payment of the related amounts. Only the full payment of the amounts assessed – within the thirty-days deadline from the assessment notice – shall maintain the extinction of the criminal liabilities set forth in Paragraph 1st of Section 5, of Law No. 131.254/2016, relating to the assets whose value was mistakenly informed (i.e., without any automatic exclusion of the Taxpayer from the regime);
• 46% of the administrative fine total collection shall be shared by the Federal Union with the Brazilian Estates and Municipalities.
By its turn, the main procedures for the Taxpayer´s adhesion and the regime´s prohibition to those occupying public positions, jobs and functions or respective relatives up to the second degree or by adoption, remain unaltered.
In sum, the adhesion to the regime is formalized by:
• the Taxpayer´s electronic voluntary disclosure statement (DERCAT), which is available at the Federal Revenue´s website (the so-called “e-CAC”) since April 03, 2017, that shall be transmitted with the use of a digital certificate by the Taxpayer himself or his legal representative; and
• the full payment of the income tax at the rate of 15% over the total assets disclosed plus the applicable fine of 20,25%;
Both the DERCAT electronic filling and the full payment of the correspondent taxation shall be performed, unfailingly, until July 31st, 2017.
We consider the re-opening of the deadline for taxpayers’ adhesion to the Brazilian Amnesty the last window of opportunity for the eligible taxpayers to voluntarily disclose and regularize before the Brazilian tax and banking authorities, any irregular assets held until June 30, 2016, eliminating, therefore, any relevant tax, regulatory and criminal exposures, maximized in the current and irreversible scenario of global tax transparency and exchange of information between authorities from different jurisdictions.
For those interested in adhering to the regime, we strongly suggest to compile, as soon as possible, all necessary data relating to the assets subject to future disclosure due to the short window of opportunity brought by the RERCT´s re-opening deadline.