Brazil offers amnesty to tax evaders

Residents of Brazil who have undisclosed assets in offshore accounts may be granted amnesty in exchange for a one-off charge, under a new Brazilian law enacted on 13 January.

According to the Society of Trust and Estate Practitioners (STEP), the disclosed amount will attract a 15% tax and a 15% fine. All other tax owed will be written off.

If assets affected are BRL100,000 (US$24,850, £17,410) or more, the participation of a financial institution is required, STEP quoted Mariana Oiticica of BTGPactual in São Paulo as saying.

“Taxpayers can regularise anything, and there will be no prosecution or investigation so long as (broadly) it doesn’t relate to corruption or drugs,” Ms Oiticia was quoted as adding.

“You don’t need to demonstrate origins of the funds with documents, but you have to tell the story; the only documentary proof required is the bank statement as at end 2014.”

Law firm Mayer Brown said the amnesty was applicable to most asset classes and types, including “bank deposits; quotas for investment funds; insurance policies; loan operations with a legal entity or physical person; amounts paid to foreign companies in the form of shares or capital; intangible assets such as software, know-how, trademarks; vehicles, aircrafts and vessels.”

Mayer Brown said the deadline for declaration is 210 days from the law’s enactment on 13 January 2106.

The law, known the Special Regime for Monetary and Tax Regulation, is said to be similar to the Liechtenstein Disclosure Facility, which came into force in September, 2009, and granted heavy discounts on penalties for those UK citizens who came forward to declare previously undeclared assets. The scheme closed on 31 December 2015.

‘Reflective of global trend’

Sean Wakeman, a tax investigations partner in the London office of Crowe Clark Whitehill, the global accountancy group, said the Brazilian tax amnesty scheme was reflective of the “ongoing global trend to raise monies from tax evasion, in order to shore up national finances”. Brazil is currently in recession, and earlier this week the International Monetary Fund said it expected the country’s economy to contract 3.5% this year — a much darker outlook than its previous forecast of a 1% fall.

“The level of capital sought to regularise tax matters at 15% broadly mirrors the average yields achieved by the UK in its series of amnesties since 2009,” Wakeman added. “It still, however, seems generous when compared to the far more Draconian percentages of capital demanded by the Internal Revenue Service in the US.”

He noted that the timing of the amnesty seemed “to fit in well with Brazil’s commitment to the Common Reporting Standard”, the new global agreement that calls for automatic exchange of information between countries, beginning next year.

“While Brazil is not one of the early adopters [of the CRS], it is one of the jurisdictions which will be undertaking its first exchanges by 2018; this allows evaders a good two years to come clean before they are otherwise discovered.”

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James Fernyhough
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