Law No. 13,428/2017, published on March 31 2017, has just reopened the deadline and established new conditions for taxpayers to join the Voluntary Disclosure Program for Unreported Offshore Assets (“RERCT“), previously established by Law No. 13,254/2016.
This new version of the regime permits individuals and corporate entities resident or domiciled in Brazil on June 30 2016, as well as by inheritance estates whose succession proceeding began until the date of its application, to disclose unreported assets of legal origin, kept abroad, earned in periods prior to that date, without incurring any administrative and criminal sanctions.
However, such amnesty is limited to the date of the taxpayers’ application to the new program, which will be reinstated for 120 days as of its regulation by the Brazilian Federal Revenue Service (“RFB“) to be made available at the end of April 2017.
According to this new arrangement, taxpayers should collect 35.25% of the corresponding amount to be disclosed (income tax at a rate of 15% and penalty equivalent to 135% of the income tax payable), considering the taxpayer’s balance or value of the assets on June 30, 2016, converted into reais (“BRL”), at the foreign exchange rate set by the Central Bank of Brazil (“BACEN“), for that date, i.e. BRL 3.209.
Taxpayers who joined the former program are allowed to incorporate additional amounts to the Currency and Tax Regularization Statement (“DERCAT“) already submitted, and collect the income tax and penalty payable, converted into reais at the above-mentioned US dollar to Brazilian reais exchange rate.
In the event that the taxpayer’s statement is inaccurate insofar the value of the declared assets is concerned, Law No. 13,428/2017 grants the RFB the right to demand payment of taxes and respective legal charges levied on the non-declared balance by means of a notice of infraction, in contrast to the first stage of the program when taxpayers were automatically excluded from the regime, with the risk of being assessed for income tax at a rate of 15%, late payment interest fees and a penalty that could reach 150% of the tax payable.
In this context, instead of the taxpayer’s automatic exclusion for any inaccuracy or divergence regarding the value of the assets, the new RERCT authorizes payment of taxes and penalties within 30 days of the notice of infraction in order to maintain the amnesty for crimes committed until the date of the application, related to the portion of the assets which have been incorrectly reported.
The possibility of adjusting value-related information without exclusion from the regime will certainly decrease taxpayers’ apprehension with regard to the criteria to be adopted for the regularization of the assets, be it the photo criterion (a “portrait” of the assets considering their situation on June 30 2016) or the “film” criterion (which includes the overall amount held abroad in prior periods, covering the disbursed portion of the assets, which no longer incorporated the taxpayer’s properties at that time).
In addition, Law No. 13,428/2017 did not include any provisions regarding the impossibility of federal, state and municipal heads of the executive branch, public agents of the direct or indirect public administration, as well as by their consanguineous spouses or relatives up to the second degree or by adoption, to join the new RERCT. As a result, the rule of the previous regime, prohibiting application by heads of any of the three branches and public agents holding office or functions on January 14 2016, remains effective in this new regime.
Income and additional gains earned as from July 1 2016, arising from such assets, shall also be included: (i) in annual income tax returns related to the 2016 calendar year, as well as future adjustments, in the case of individuals, (ii) in corporate accounting records relative to the calendar year of the application and to subsequent years, in the case of corporate entities, and (iii) in the Declaration of Brazilian Capital Abroad (“CBE“), relative to the 2016 calendar year, applicable to both.
The disclosure of income and additional gains as indicated above, if effected by the last day of the deadline for joining the new RERCT, will be effective as voluntary disclosure, exempting taxpayers from late payment fees, even though such amount should still be updated by the Selic rate.