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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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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FATCA and CRS increase pressure

We have being talking for some time about the FATCA and CRS impacts on people’s lives and however as incredible as it seems most prefer to think that they won’t be hit (the syndrome of it will not happen with me) and shove their heads in a hole or worse are very badly advised by their consultants and lawyers who continue taking advantage of the trust of their customers to push the problem under the carpet. The world is changing and fiscal transparency is here to stay, as well as reduction of privacy. To stay protected it will be necessary to raise the sophistication of structures to remain in compliance with the rules. But let’s not spend much time just talking and let’s get it to the facts.
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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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Swiss Banks freezing accounts and blocking withdrawals

For the past months we have being receiving information that Italian clients were having some problems transferring or withdrawing assets from Swiss banks. Since this information was getting almost zero repercussion outside Italy we decided to explain what is happening.

As you may already know about the global shift to tax compliance, usually you hear more US related news. This time Italians are under scrutiny from their government and Swiss deposits are the top priority. Anyone thinking that this won’t happen to many other countries think again. Belgium and France are on the same path.

To their defense, Swiss banks are adopting measures to safeguard their interests and operations (just to make sure that you all understood, THEIR interests not their client’s). Some of them are only allowing transfers to accounts in white listed countries that are already under OECD tax information standards, only under the clients personal name and after the client went to the bank in person, with his lawyer to sign documents saying that he is tax compliant in his home country reliving that bank of any misconduct. Of course the client has to convince the receiving bank that his funds are tax compliant as well. Cash withdrawals are also being blocked and recent court cases are backing the right of the banks to do so (don’t you read the bank account contract’s small letters??). Credit Suisse and BSI (recently acquired by BTG Pactual) are among those taking this measures.
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Brazil Receita Federal issued new rules for the differentiated monitoring of large taxpayers

Brazil Receita Federal issued new rules for the differentiated monitoring of large taxpayers, which is the surveillance of economic-tax behavior of individuals, sectors and economic groups, especially large enterprises.
 
Monitoring has the objective of “producing analysis on the most significant negative variations that result or may result in loss of actual or potential revenue” and “promote tax compliance initiatives among major contributors, prioritizing actions to self regulation”.
 
According to the decree published in the Official Gazette, this monitoring will be carried out systemically, regionally-oriented work processes defined by the Special Coordination Major Contributors (Comac), subject to the guidelines established by the Supervisory Secretariat (Sufis).
 
The criteria for classifying companies subject to differentiated monitoring will be declared gross income declared debts, wages and participation in the collection of taxes administered by Revenue.
 
Individuals will be subject to this monitoring from the analysis criteria as a total declared income, assets and rights in equities operations, one-person investment funds and participation in legal persons subject to differentiated monitoring.

See the ordinance publication of the full (portuguese) here .

Brazil Receita Federal forgives Swiss HSBC account holders.. Such nice guys.

The Brazilian Internal Revenue Service (Receita Federal) already have the leaked Swiss HSBC data in their hands and they have successfully identified 7.243 individual tax payers as account holders. Interesting enough they say they will forgive these people for any tax evasion. Can you believe that? That would be great news for a lot of people I’m sure if that wasn’t a lie. What they will do is only consider the period from 2011 to 2014 for that purpose, but because they can only charge tax payers for a period of 5 years back, not what you were expecting right?

There’s another catch, when you don’t declare offshore money there’s the possibility of another crime involved one called unreported remittance of currency and for that there’s no 5 years limitation period. Penalty can go from 2 to 6 years of jail time.
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