1 Brazil Archives - Dorr Consulting

Tax on offshore gifts?

A very interesting development is under way at the Supreme Court. As our clients and partners know we have always advocated about the opportunity of setting up an international estate planning with the benefit of not having to pay ITCMD tax on offshore gifts. That is possible because of a loophole in the regulation and with a lot of cases lost by the estates revenue services makint it pretty secure until now.

Sao Paulo estate revenue service lodged an appeal against the judgment of the 6th Public Law Chamber of the São Paulo Court of Justice (TJ-SP) which recognized the right of the taxpayer not be compelled to collect the amount for the gift tax/inheritance tax (ITCMD) on the bequest of a property located in Treviso, Italy, and on the transfer of a sum of money foreign (Euro), both operations carried out in 2005.
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That must be a bad joke!

In the worst moment in for the last 15 years we are sure to be very far from good news. The last one is the hoax that Central Bank might loose it’s ministry status, which led Alexandre Tombini the Central Bank president to issue a statement that he would leave the job if that happens. Loosing the ministry status, the Central Bank president can be liable for his actions and prosecuted in first instance courts.

Several newspapers articles circulated the hoax that culminated in Tombini’s statement. Apparently our politicians think the countries problem is not big enough.

This is part of the reduction of 10 ministries announced by the government. The summary is that for 4 of those 10 ministries will loose their status but the budget will remain the same! The others are ministries that have the lowest budgets meaning that this cost reduction will have little impact. That must be a bad joke!

If we were on the rating agencies shoes we would already have downgraded the rating to junk a long time, what seems to be only a matter of time now.

FATCA is in effect between Brazil and USA

As we noted on a previous post, FATCA IGA was heading for a fast approval on the Brazilian Congress. Last week we had the publication of the Decree nº 8.506 that puts the agreement into effect immediately. That means that this the beginning of the automatic exchange of information of tax matters in Brazil.

The first exchange will occur right on the next month, September, as financial institutions had until today to send the information to local authorities for them to exchange with the foreign authorities as of tomorrow.
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Inheretance tax at 20%?

Inheritance tax rate (ITCMD) at 20% seems to be a reality ever closer. Not only by the government’s present proposal a few months, but now officially a proposal from the states is on the table since the 20th of this month.

The strong increase in revenue on gifting (53.8% higher than the same period 2014 in São Paulo) shows that many families are front running this scenario. On one side will be much more expensive to do estate planning or probate proceedings in Brazil, on the other Brazilian culture to always left the matter for later, often beyond the time required for an orderly planning, might change making families seek more sophisticated solutions to reduce or avoid the higher taxation.
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Tax Heavens

This week the Brazilian Senate approved on the Economic Affairs Commission (CAE) a proposal to change the criteria of jurisdictions classified as tax havens. Great news for the use of offshore structures for various purposes.

Brazil stood out from the rest of the world having a more severe classification and the new proposal aligns the country criteria to one used internationally thus avoiding distortions as was the case of Singapore which under Brazilian rule was considered a tax haven while the same jurisdiction was not part of the US list or the European Union list.
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The long-awaited amnesty

Amnesty for whom? That’s an interesting question. We waited a while to finally make our comment on the matter and thus we could see how some legal consultants are seeing the project to implement the RERCT (A special regime to come into tax and currency exchange compliance) to be regulated by the PLS 298/15 or to simplify, a project for capital repatriation. Our vision always has been accompanied by a certain skepticism about the government’s ability to pass such a project with so little political capital as now, but let’s leave that aside for a moment.

The project itself is bound to create a fund for loss compensation with ICMS due to the attempt to finally promote a reform of such a tax to end the fiscal war between the states. Unfortunately as is common in Brazil is an inconsistency to expect a fund that require recurring funding to be powered via a measure that will promote a non-recurring revenue, famous cover the sun with a sieve. But this is not a project design error itself, but the fiscal measures plan.
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Dilma Rousseff government accounts to vote now!

With the decision of the Supreme Court that the presidential accounts must be voted on in a joint session between the senate and the chamber of deputies, the government that recently sewed an agreement with Renan Calheiros, president of the Senate and the Congress, has woven an important victory, because only he can put the accounts of Dilma Rousseff on the agenda for a vote for approval or rejection, which they are trying to avoid at all costs because it would bring further complications for the president.

Politicians need to understand that they have responsibilities to the public and that voting and ruling over the accounts is the democratic way we have to evaluate them and if it is the case claim their responsibility, it is an instrument of the people.

Renan Calheiros said this week that it is not the interest of the country at this time put on the presidential accounts for voting.

Do you agree with Renan’s statement? Do you accepts that only the person who at the time can put the accounts to a vote decides for all the millions of Brazilians to such an important issue?

If like me you do not agree and are tired of seeing all end up in pizza Join the petition to Congress to bring the accounts to the agenda </ strong> once the assessment of TCU is finished.

https://secure.avaaz.org/po/petition/Congresso_Nacional_Brasileiro_Colocar_em_votacao_as_contas_presidenciais_de_Dilma_Rousseff/?nRjTGjb

Brazil – FATCA

Brazil approved the IGA (Intergovernmental Agreement) for the implementation of FATCA (Foreign Account Tax Compliance Act) agreement to exchange tax information and Improving International Tax Compliance with the United States on July 25th. The article was approved at an accelerated rate due to the meeting between President Dilma and US President Barack Obama at the end of the month.

The matter reached the Senate as Legislative Decree Project International Agreements 257/15 and was dispatched for analysis of the Foreign Relations Commission (CRE), where it obtained a favorable opinion for its approval, and then forwarded to the Senate and got unanimous approval.
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Estate Tax

Again returned the agenda of fiscal adjustment an increase in the estate tax, and as we anticipate here in mid-April, this would be the most logical and simple way forward:

Interestingly, the Governor chose to push the less efficient hand, since introducing a tax on large fortunes or a federal tax on inheritances coming up in various difficulties, the path that seems to be more logical would be to legislate to increase ITCMD rates thus increasing its revenues by states, including Maranhão, with some compensation in transfers received in order to also benefit the federal government.

Check our full review on that subject in April 14th: Veja nosso post completo de 14 de Abril: A little push… to the wrong direction?/a>

Although the Finance Minister Joaquim Levy is against the proposal, the options seem to be running out, since successive defeats have become virtually certain to reduce the fiscal target for this year, and that this tax would hit the richest people of society, in line with the PT will. Both Mercadante, Chief of Staff and Nelson Barbosa are supporters of the idea.
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Switzerland and Brazil to exchange more information

It is known that the automatic exchange of tax information between the two countries will take place in 2018 (end of 2017 for Brazil and 2018 for Switzerland), but the conversations between the two for the signature of a bilateral treaty are well advanced and should be signed well before the OECD agreement be operational.

Philippe Nell (head of the Americas division of SECO, the State Secretary for Economic Affairs of Switzerland), passed the information that the Swiss government is in advanced negotiations for a bilateral agreement with Brazil. This commitment includes the exchange of information, as foreseen by the OECD agreement, but also to free trade.
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