The RERCT allows the regularization of resources, assets or rights, of lawful origin, held abroad by individuals and legal entities[1] resident or domiciled in the country on December 31.12.2014, XNUMX, that were not declared or that were declared incorrectly by the taxpayer. The RERCT established a criminal amnesty for crimes covered by the Repatriation Law, that is, the legal oblivion of acts considered unlawful. The amnestied crimes remain in effect, but the conduct of those who committed them will be legally oblivion, provided the requirements set forth in said Law are met.
In general terms, formal adherence to the program is achieved through the following procedures, to be adopted by the taxpayer:
- Submission of the Exchange and Tax Regularization Declaration (“DERCAT”), approved by Executive Declaratory Act No. 02/2016, to be transmitted through access to the Virtual Service Center of the Brazilian Federal Revenue Service (e-CAC) in the period between 04.04.2016 and 31.10.2016, being possible to rectify the Declaration to include or modify the information contained therein;
- Full payment of Income Tax, at the rate of 15% and the regularization fine corresponding to 100% of the tax collected, both calculated on the balance of resources existing on 31.12.2014/2,6562/XNUMX, converted into Reais at the US dollar exchange rate on the same date (BRLXNUMX).
If there is no balance, or if the resources to be regularized are no longer owned by the declarant on 31.12.2014/XNUMX/XNUMX, the presumed value of such assets on said date must be used, indicated by a suitable document that reflects their value or the transaction equivalent to it;
(c) Rectification of Income Tax Declarations (in the case of individuals), tax and accounting records (in the case of legal entities) and, in both cases, Declarations of Brazilian Capital Abroad (CBE), all relating to the calendar year 2014 and later, to provide information on the assets mentioned in the DERCAT;
The income tax rate and penalty percentage described in item (b) above appear to be a genuine benefit to the taxpayer. If the regularization were made outside the scope of the RERCT, considerably higher percentages would be applied to the calculation of income tax and the penalty, and interest on arrears would also be levied, as detailed below:
Adherence to the RERCT implies irrevocable admission of debts related to Income Tax that was not collected due to the failure to declare assets, remission of other tax credits and a 100% reduction in other fines and charges related to them, with regard to taxable events occurring up to 31.12.2014/XNUMX/XNUMX.
The aforementioned remission, however, does not cover tax credits that have already been extinguished or that have already been assessed and that have not been paid by January 14.01.2016, 13.254. This restriction, however, is not provided for in Law No. 2016/XNUMX and may be subject to legal action.
Taxpayers who fail to comply with the aforementioned procedures or submit false information via DERCAT regarding the nature, ownership, origin, or value of assets will be excluded from the program. The exclusion decision may be appealed within 10 days, and the final decision will be made by the Brazilian Federal Revenue Service Superintendent with jurisdiction over the taxpayer's tax domicile.
It is worth noting that joining the RERCT does not imply the obligation to repatriate resources, and that its benefits do not eliminate the possibility of potential questions from the State and Municipal Tax Authorities.
From a criminal perspective, we understand that not adhering to the RERCT could be a risky decision, given that recent international agreements will allow for a broad exchange of information between the tax authorities of Brazil and other countries. A good example of this is the agreement signed between Brazil and the US for the implementation of the "Foreign Account Tax Compliance Act” (FATCA).
In our view, the program is an excellent opportunity to regularize resources or assets held abroad that have not been declared to the tax authorities. However, caution is required to avoid providing documents proving the commission of crimes not covered by the Repatriation Law.
[1] Except for those who have been convicted in a criminal action whose object is one of the crimes provided for in the Repatriation Law, even if not final, and those who hold public management or elective positions, jobs and functions, or who have in this situation, on January 13, 2016, a spouse, blood relatives or relatives by marriage, up to the second degree or by adoption.
