by Angelico Law on March 8, 2016
With Brazil’s weak economy showing no sign of near-term recovery,
government officials are considering options for shoring up declining tax
revenue. One way they hope to do it is by encouraging citizens to bring back
the taxable assets that they have stashed overseas.
For a brief period of time,
the government has changed its tax law to encourage repatriation of those
overseas assets. President Dilma Rousseff signed the bill that grants amnesty
to those who have undeclared offshore assets. In exchange for this amnesty,
asset holders will be subject to taxes and fines.
The repatriation plan comes as Brazil’s inflation rate, now more than 10
percent, is at its highest level in the last 13 years, according
to Agencia EFE. Meanwhile, the
value of the Brazilian real in recent months has fallen considerably against
the U.S. dollar. When the Senate approved the bill last year, officials
projected the repatriation measure would help raise 11 billion reais, about
$2.74 billion, in revenue, according
to Reuters.
However, the new law might not bring the tax revenue totals that lawmakers
originally envisioned. Rousseff vetoed parts of the bill that included jewelry,
precious stones, artwork, and antiques. She also struck down the part of the
bill that would allow people to pay their fines in installments. As reported by
Reuters, those changes followed criticism that the original bill was already
too weak on tax dodgers.
With the repatriation measure now law, those who repatriate assets from
overseas will pay a one-time tax of 15 percent on the value of the reported
assets, according
to the Society of Trust and Estate Practitioners (STEP). Asset holders must also pay a penalty of the same amount. This payment
will settle any outstanding tax debt. However, those who have already paid part
of their tax obligations will not be reimbursed for any amounts that they
already paid.
People who have assets overseas have limited time to take advantage of the
new law. The amnesty opportunity closes 210 days from the law’s enactment by
the Federal Revenue Bureau. That time window is even smaller than it appears
because taxpayers cannot submit their declarations until the Bureau issues
regulations providing additional details about the disclosure procedures.
That
means that asset holders have a short amount of time to make a decision. Either
they can bring their assets back to Brazil and pay a fine, or they can keep
those assets offshore and risk possible criminal prosecution by the government.
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