Brazil

Brazil: The Federal Government establishes the Special Tax Regularization Program

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On 31st May 2017 the Federal Government published Provisional Measure No. 783, which established the Special Tax Regularization Program (PERT). Under the program’s rules, taxpayers may settle debts with the Federal Revenue Service and the Attorney General of the National Treasury, due by April 30, 2017.

Membership of PERT may be made through a request to be made by August 31 of 2017 and will cover debts indicated by the taxable person, in the condition of taxpayer or responsible, even if they are in administrative or judicial discussion, as long as the taxpayer has previously withdrawn from the litigation. Likewise, the taxpayer may include in this program debts that have already been included in other installments.

The PERT allows the taxpayer to opt for one of four modalities:

  1. Exclusively for debits in the Revenue, the taxpayer can choose the cash payment, with a minimum of 20% of entry and the remainder to be paid with credits of tax loss and Base of Negative Calculation of the Social Contribution on the Net Income (CSLL).
  2. For debts in the Revenue and in the Attorney of the National Treasury, the option may be by installment in 120 installments, without reductions, being:
  • 4% of the debt in installments 1 to 12;
  • 5% of the debt in installments 13 to 24;
  • 6% of the debt in installments 25 to 36;
  • Installment of the remaining balance 84 times, as of the 37th month.
  1. Also for debts in the Revenue and in the Office of the Attorney General of the National Treasury, an option can be made for the payment of 20% in 2017, in 5 installments, without reductions, and the remainder under one of the following conditions:
  • Discharge in January 2018, in a single installment, with reductions of 90% interest and 50% of fines; or
  • Installments in up to 145 installments, with reductions of 80% of interest and 40% of fines; or
  • Installments in up to 175 installments, with reductions of 50% of interest and 25% of fines, with installments corresponding to 1% of the gross revenue of the previous month, not lower than 1/175.
  1. Finally, for debts of less than R $ 15 million under the Revenue and the Attorney of the National Treasury, the taxpayer may choose to pay 7.5% in 2017, in 5 installments, without deductions, and the remainder to be paid Under one of the following conditions, with cumulative use, in this order, of reductions in additions and the utilization of credits:
  • Payment in full in January 2018, with reductions of 90% interest and 50% of the fines and use of credits of Tax Loss and Negative Calculation Base or other own tax credits administered by the Internal Revenue Service; or
  • Installments in up to 145 installments, with reductions of 80% of interest and 40% of fines and use of credits of Tax Loss and Negative Calculation Base or other tax credits managed by the Federal Revenue Service; or
  • Installments in up to 175 installments, with installments corresponding to 1% of the gross revenue of the previous month, not less than 1/175, with reductions of 50% of interest and 25% of fines and use of credits of Tax Loss and Base of Negative calculation or other own credits of taxes administered by the IRS.

Brazil: Additional guidance on CbC reporting rules issued

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Normative Ruling 1,709/2017 of 25 May 2017 amended the 2016 normative ruling that introduced the country-by-country (CbC) reporting obligation in Brazil effective from fiscal year(FY) 2016. According to the new ruling for FY 2016, the Brazilian tax authorities will allow an ultimate parent entity (UPE) that is resident in a country with which Brazil has not signed a competent authority agreement (CAA) for the exchange of CbC reports, should be considered as the reporting entity of the group on a conditional basis, provided the UPE’s jurisdiction allows for voluntary filing in FY 2016.

If the competent authority agreement is not signed with Brazil by 31 December 2017, the Brazilian constituent entity may amend its corporate income tax return (which would have been filed by 31 July 2017) within 60 days (of 31 December 2017) and file the CbC report on behalf of the entire group, or it may designate an adequate surrogate entity.

Brazil releases withholding tax guidance on the importation of services

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On 22 March 2017, the Brazilian Federal Revenue Service (RFB) released guidance in SC (Solução de Consulta) no. 153/2017 of 2 March 2017 regarding taxes on the importation of services. It primarily applies to the importation of services and the “triggering event” for the tax. The guidance clarifies that the triggering event is the date when the income becomes economically or legally available to the foreign creditor.

Brazilian CFC rules apply despite treaties

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The Federal Administrative Council of Tax Appeals (Conselho Administrativo de Recursos Fiscais, CARF) decided on 14 March 2017 that taxation in Brazil of profits of indirect controlled foreign companies (CFCs) under CFC rules is not prevented by tax treaties.

Accordance with the reporting of administrative judge, a tax treaty does not allow taxation in Brazil of profits of CFCs situated in a treaty partner’s territory, but does not prevent taxation in Brazil of profits realized by a Brazilian company through those CFCs.

Brazil publishes Normative Instruction 1,700/2017 in the Official Gazette

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Decree No 2017-22042 of 7 March 2017 fixing the market interest rates for interest-free liabilities have been published in Official Journal No 15371 on 17 March 2017. The Decree upgrades and replaces Decree no. BLKB2015 / 1650M of 10 December 2015 and has been effective since 18 March 2017. The Decree provides an overview of the market interest rates per month for the period 2004 to 2016. The latest interest rate is 0.3% for December 2016.

Brazil declare targeting plan for tax inspections in 2017

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The tax authorities declared the aim plan for tax inspections in 2017 on 2nd March 2017. According to the tax plan focus will be given to following specific topics,

  • taxation of CFC profits
  • tax planning involving company reorganizations and participation in investment funds
  • tax evasions through the use of the exemption on distribution of dividends;
  • and in the fuel, cigarette and beverage industries.

Brazil approves a proposal for re-opening of special regime

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The Chamber of Deputies has sanctioned a proposal for the re-opening in 2017 regarding the special regime for regularization of non-notified assets abroad on 15th February 2017. The proposal was approved by the Senate on 23rd November 2016. The first regime, designated as a special regulation, the regulation of non-notified funds, goods and rights abroad (Regime Especial de Regularização Cambial e Tributária, RERCT) and is was ended on 31 October 2016.

The Chamber of Deputies approved the proposal with the following main changes:

The regulation of the non-notified assets by the new rule will be the payment of: Income tax of 15% on the total value of the assets, in the original text it was 17.5%; a fine of 20.25% on the total value of the assets, in the original text it was 17.5% or 135% on the total sum of the income tax due.

The proposal will return to the Senate for further approval.