The deadline for Brazil’s offshore account, income and asset reporting passed last week. The Brazilian Federal Revenue Secretariat (SRF) – Brazil’s equivalent of the IRS – claims more than $4 Billion (US) in revenues from voluntary disclosures much like the US Offshore Voluntary Disclosure Program or OVDP. The Brazilian FATCA offshore disclosures resulted in voluntary reporting of $12.6 Billion in offshore accounts resulting in the $4 Billion in tax revenues generated by the program.
Brazil’s program has moved to completion with impressive speed. The Brazilian Congress approved the “Repatriation Law” in December of last year (and in the midst of a political crisis that would result in the impeachment of their President). Regulations for the new program were finalized in March of this year and the program is already nearing completion. How did they accomplish this so quickly?
The short answer is the prospect of heavy penalties Brazilian taxpayers would face if they failed to register. The program required Brazil’s taxpayers to agree to a 15% tax on unreported income and a one-time 15% penalty on assets that had not previously been disclosed to the SRF. However, like the US OVDP program, Brazil’s tax rate will now rise to 27.5% and steep fines of up to 225% as well as the genuine threat of criminal prosecution. Brazil has successfully completed agreements on information sharing with world banks and over 100 countries for automatic information exchange. Brazil has bilateral “investigation” agreements with 34 nations. The SRF expects it will be much more difficult for Brazilian taxpayers to hide income and assets in the future.
The international tax attorneys at Allen Barron are prepared to help US taxpayers and foreign nationals from all sovereignties to disclose hidden offshore account, asset and income and come into FBAR compliance with the IRS as well as tax compliance with their home nations. The world is changing, and the automated exchange of information between international banks and investment houses and sovereign tax authorities is well under way. We invite you to contact us for a free consultation at 866-631-3470.
The Brazilian FATCA offshore disclosures are yet another success story as the world moves toward information sharing and open insistence on “beneficial ownership interest” disclosure. Much like the Argentinians we discussed last week, one Brazilian official noted: “the world is beginning to have no boundaries for the [SRF].” The continuing lesson for global and US taxpayers: Investigators for the IRS, the SRF and world tax agencies will no longer lose the ability to track taxpayer activities at the water’s edge.