Brazil Enacts Law On Voluntary Disclosure Of Unreported Offshore Assets

Economic uncertainties and past policies, including high inflation and risk of confiscation, have made many Brazilians maintain funds overseas undeclared to the Brazilian Federal Revenue Office (Receita Federal do Brasil) and to the Brazilian Central Bank (Bacen).

Such practices may have resulted in crimes, particularly in violation of tax law (tax evasion) and foreign exchange regulation (failure to report deposits abroad to Bacen).

The situation has worsened for said persons as a result of the implementation of Fatca - Foreign Account Tax Compliance Act in the United States and the possibility of automatic exchange of information between various countries (as of 2017 or 2018, depending on the commitment undertaken by each country), in accordance with the Common Reporting Standard (CRS) of the Organization for Economic Co-operation and Development (OECD).

In this context, governments have been encouraged to provide taxpayers a last window of opportunity to regularize undeclared assets. Voluntary disclosure programs have been stimulated by the OCDE to be adopted as a necessary step towards attaining an international tax compliance environment. Many countries (USA, England, Sweden, Chile, Spain, Australia, Switzerland, Italy, South Africa, the Netherlands, Portugal, Germany and France, among others) already maintain or have adopted these programs.

Brazil has followed the same path. On January 13, 2016, Law No. 13,254 established the Foreign Exchange and Tax Regularization Special Regime (RERCT) to grant amnesty on taxes and crimes pertinent to the maintenance of undeclared assets abroad. The President of Brazil has vetoed 12 of the items to the program that were approved by the Senate. Following Federal Revenue Office regulation, taxpayers will have 210 days to adhere.

We have here highlighted some of the main items of Law No. 13,254/16 regularization program:

Who can adhere?

Residents in Brazil on December 31, 2014 that have been or still are owners or holders of assets, goods or rights in periods prior to December 31, 2014.

Who cannot adhere?

(i) Non-residents or non-domiciled in Brazil on December 31, 2014;

(ii) Individuals convicted in criminal prosecutions regarding the crimes mentioned in (forgiven by) the Law;

(iii) Holders of public positions, employment or functions, their spouses and blood relatives and in-laws, up to the second degree or adopted, at the time of the law's publication.

To what assets and rights is the amnesty...