Law No. 13,254/2016 was published today establishing the rules of the Special Regime ("RERCT") applicable to the regularization of unreported funds or assets held abroad that were not properly reported to the Brazilian authorities.

In a nutshell, RERCT is applicable to the assets held abroad until December 31, 2014, by Brazilian residents, considering the dollar exchange rate of this date (December 31, 2014). Taxpayers are granted a period of 210 days to start the regularization process, after the regulation of the mentioned Special Regime by the Federal Revenue Service (expected to be published until March 15, 2016).

The regularized assets are subject to tax rate of 15% (income tax) and also subject to a penalty of 100%. Considering the dollar exchange rate of December 31, 2014, and the current exchange rate, the effective tax burden is of 20,05%.

Furthermore, the regularization of unreported funds, according Law No. 13,254/2016, introduces an amnesty for the crimes provided by Law No. 7,492/1986 (maintenance of funds abroad) and the crimes provided by Articles 1 and 2 of Law No. 8,137/1990 (tax evasion). Also, the following penalties are no longer applicable: (i) the penalty regarding the failure to report capital abroad to the Brazilian Central Bank (BACEN); (ii) other penalties imposed by the Brazilian Securities and Exchange Commission (CVM) and other regulatory entities; and (iii) penalties applicable to the income tax.

We will inform us as soon as the regulations of the Federal Revenue Service are published.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.