The regulation in question, still pending approval by the Chamber of Deputies and presidential sanction, aims to establish new conditions for individuals and legal entities, resident or domiciled in Brazil on June 30, 2016, who maintain resources of lawful origin abroad, earned in periods prior to this date and which have not been declared to the competent authorities in Brazil, to be able to do so without incurring criminal sanctions and with tax advantages.
Among the changes proposed by PLS 405/2016, the following stand out:
- The reopening of the period for joining the program for 120 days, counting from the thirtieth day of the publication of the law, and the possibility of joining also by non-residents in the country on June 30, 2016, who were in this condition in the period between 2010 and 2016;
- Criminal amnesty for conduct relating to resources, assets and rights subject to regularization is limited to the date of effective adherence to the program;
- The possibility of regularizing assets, goods and rights held abroad based on their financial situation on June 30, 2016, and no longer on December 31, 2014;
- The increase in the income tax rate from 15% to 17,5% and the application of a regularization fine at a percentage equivalent to 100% of the tax collected, making a total percentage of 35%;
- The exchange rate to be used for converting the resources, assets and rights subject to regularization into reais, as well as for calculating income tax and the fine, will be that of June 30, 2016 (USD 1,00 = BRL 3,21); and
- The impossibility of adhesion by the heads of the federal, state and municipal executive powers (Presidents and Vice-Presidents, Governors and Vice-Governors, Mayors and Vice-Mayors) and by any public agents of the direct or indirect public administration in the three spheres of power in the exercise of mandate, position, employment or function on January 14, 2016.
Some inconsistencies in the wording of the bill will need to be corrected by the Chamber of Deputies or will be subject to presidential veto, such as the provision that determines the inclusion of income earned as of July 1, 2016, arising from the use of resources subject to regularization in amended annual income tax adjustment declarations, in the case of individuals, in corporate accounting records, in the case of legal entities, and in the amended declaration of assets and capital abroad (“CBE”), applicable to both, given the inapplicability of such provision to income earned throughout the 2016 calendar year, and the non-extension of the impossibility of membership to spouses and blood relatives or in-laws, up to the second degree, of public agents and members of the federal, state and municipal executive branches.
Other points of PLS 405/2016 that will certainly be subject to discussion, as they represent legal uncertainty for participating taxpayers, are the lack of definition of the photo criterion (adherence based on the "snapshot" of the asset or right's equity situation on June 30, 2016) or film (declaration of the overall value held abroad in previous periods, including the consumed portion of the assets, which no longer form part of the declarant's assets on the aforementioned date) and the possibility of extending adherence to the program by those taxpayers who already formalized their adherence within the previous deadline (until October 31, 2016) to include assets, rights and income earned between January 1, 2015 and June 30, 2016, considering that the previous regime already determined the regularization of these assets through voluntary reporting, taxed based on normal income tax rates and with the addition of interest on arrears.
