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18.11.2015 02:49 Age: 2 days

Repatriation of funds and criminal amnesty under Brazil's Voluntary Disclosure Program

By Alessandro Amadeu da Fonseca TEP of Mattos Filho Veiga Filho, Marrey Jr. E Quiroga Advogados

The Brazilian federal government has submitted to Congress Bill No.2,960 of September 2015. It establishes the Voluntary Disclosure Program for assets held irregularly by Brazilian residents. If approved, the program would increase fiscal revenue, reducing the public deficit.

In short, the Bill aims to create the Special Regime for Exchange and Tax Regularization (RERCT), in order to encourage taxpayers to regularize their assets transferred or held abroad that were not properly reported to local tax authorities.

Those participating in RERCT will be subject to income tax at a rate of 15 percent and a penalty of 100 percent of the income tax due (so 15 percent income tax + 15 percent fine). The assessment corresponds to the balance of assets held by the taxpayer on December 31, 2014; the cut-off date that also applies for the US Dollar exchange rate. In practical terms, the cost of regularization is 30 percent, considering the balance of assets and the USD exchange rate on December 31, 2014 leads to an effective rate of around 21 percent - taking into account the significant devaluation of the Brazilian Real against the US Dollar.

Aside from tax and penalties, the RERCT would introduce an amnesty for crimes related to holding unreported assets abroad (such as tax evasion, money laundering, etc.). Participation in the amnesty is the only way for individuals to avoid criminal sanctions.

Bill No.2,960 was voted on last week at the Deputy's Chamber and was submitted to the Brazilian Congress for approval. If approved, the Federal Government expects to collect up to BRL150 billion (approximately USD40 billion) for the public purse.


Repatriation of funds and criminal amnesty under Brazil's Voluntary Disclosure Program