15 January 2016
On January 13th, 2016, Law No. 13,254/2016 was enacted, thereby implementing a Special Regime for Monetary and Tax Regulation (“RERCT”).
The RERCT allows people or legal entities, residents or domiciled in Brazil on December 31, 2014, to voluntarily declare legally obtained goods or titles that were previously undeclared. The RERCT also allows the amendment of declarations that were made inaccurately or with omission of assets that were in possession before December 31st, 2014, whether they were remitted, obtained abroad or repatriated by residents or entities domiciled in Brazil.
The regime is applicable to all resources, assets or rights legally obtained, including but not limited to: 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.
In order to benefit from RERCT, individuals or legal entities must file a “Single Declaration of Regulation” to the Federal Revenue Office, with a copy sent to Brazilian Central Bank for archiving purposes. The declaration must include detailed descriptions of resources, assets and titles to be regulated and that were in possession before December 31st, 2014 with an indication of their value in the Brazilian real. If the amounts are no longer available or the property title was no longer in ownership on December 31st, 2014, said declaration must contain a detailed description of acts classified as a criminal act as indicated in Section 5, §1st of Law No. 13,254/2016.
In addition, an income tax at a rate of 15% (fifteen percent) will be levied as capital gain on the value of the reported assets and a 100% fine (one hundred percent) off the value of the calculated tax are requirements for joining the Special Regime. The tax paid will be considered a definitive taxation and reimbursement of amounts previously paid is not allowed.
The inclusion of resources, assets or rights in RERCT implies a remission of tax credits derived from the non-fulfillment of tax obligations and a 100% reduction in legal charges and penalties related to the amounts declared in relation to the taxable events that occurred up until December 31st, 2014, with exception to the taxes withheld and not paid in the legal period.
If filed by a physical person, the amounts indicated in the Single Declaration of Regulation shall be informed through the rectification of the Declaration of Annual Adjustment for the calendar year of 2014 and subsequent years. If filed by a legal entity, such amounts must also be included in tax bookkeeping for calendar year of 2014 and subsequent years. In both cases, if applicable, such amounts shall also be indicated through amendment to the Declaration of Foreign Assets for the calendar-year of 2014 and subsequent years.
It should be noted that RERCT is not applicable to individuals or legal entities that have been sentenced in criminal cases that are within the scope of the criminal acts described in Section 5, §1st, of Law No. 13,254/2016. However, if the requirements for inclusion of resources, assets or rights in the RERCT were fulfilled prior to any decision issued in a criminal lawsuit became final, the criminality related to these acts will be extinguished.
Finally, it is important to highlight that the deadline for acceptance into the Special Regime for Monetary and Tax Regulation will be 210 (two hundred and ten) days from the enactment of the regulatory act by the Federal Revenue Office.