Brazil Encouraging Asset Repatriation

What is the latest news about Brazil’s repatriation law?

Brazil is hoping to encourage citizens to voluntarily repatriate assets held abroad with a new repatriation law. Known as “RERCT,” (Regime Especial de Regularização Cambial e Tributária) the law established a new tax and currency exchange voluntary disclosure and amnesty program.

Voluntary Disclosure

The government hopes that Brazilian residents will voluntarily disclose both tangible and intangible assets that were either remitted or maintained abroad as well as those that were repatriated. The law applies to assets that were not previously reported or disclosures that contained material errors. The law applies to any Brazilian – whether an individual or legal entity, who was a tax resident on December 31, 2014.

The asset disclosure is to be reported in a special tax return filed with the Brazilian Revenue Service (Receita Federal Brasileira). The return, referred to as a “DUR,” must include a detailed description and market value of the assets including:

  • bank deposits
  • investment fund quotas
  • insurance policies
  • loan transactions with persons or entities
  • stock/share capital in foreign companies
  • any intangible assets available abroad including real estate, vehicles, aircraft or other movable asset subject to registration

Asset Valuation

A key aspect of this law is the valuation of these assets as these will be deemed income as of December 31, 2014 and will be taxed at a capital gains tax at a 15 percent rate. Moreover, residents will need to determine the value of the assets by converting the foreign currency into Brazilian currency. The RFB will be establishing formal guidelines by March 15, 2016, and residents will be granted 210 days after that to take part in the voluntary disclosure.

Benefits of RERCT

The goal of the law is to provide amnesty to residents who have not previously reported assets held abroad and to encourage repatriation. Some of the benefits of this voluntary filing include:

  • cancellation of tax assessments for not complying with tax laws
  • cancellation of penalties that would be imposed by federal regulatory authorities
  • full criminal amnesty

Residents that voluntarily repatriate funds must do so through an authorized financial institution in Brazil which will then turn that information over to the tax authorities. This rule covers all tangible and intangible assets remitted and maintained abroad not in accordance with prevailing tax and currency exchange laws.

If you have questions about RERCT, you should consult with a qualified international tax attorney who is familiar with the Brazilian tax code and the nuances of this new law.

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