Economic uncertainties and past policies, including high inflation and risk of confiscation, have made many Brazilians maintain funds overseas undeclared to the Brazilian Federal Revenue Office (Receita Federal do Brasil) and to the Brazilian Central Bank (Bacen).

Such practices may have resulted in crimes, particularly in violation of tax law (tax evasion) and foreign exchange regulation (failure to report deposits abroad to Bacen).

The situation has worsened for said persons as a result of the implementation of Fatca - Foreign Account Tax Compliance Act in the United States and the possibility of automatic exchange of information between various countries (as of 2017 or 2018, depending on the commitment undertaken by each country), in accordance with the Common Reporting Standard (CRS) of the Organization for Economic Co-operation and Development (OECD).

In this context, governments have been encouraged to provide taxpayers a last window of opportunity to regularize undeclared assets. Voluntary disclosure programs have been stimulated by the OCDE to be adopted as a necessary step towards attaining an international tax compliance environment. Many countries (USA, England, Sweden, Chile, Spain, Australia, Switzerland, Italy, South Africa, the Netherlands, Portugal, Germany and France, among others) already maintain or have adopted these programs.

Brazil has followed the same path. On January 13, 2016, Law No. 13,254 established the Foreign Exchange and Tax Regularization Special Regime (RERCT) to grant amnesty on taxes and crimes pertinent to the maintenance of undeclared assets abroad. The President of Brazil has vetoed 12 of the items to the program that were approved by the Senate. Following Federal Revenue Office regulation, taxpayers will have 210 days to adhere.

We have here highlighted some of the main items of Law No. 13,254/16 regularization program:

Who can adhere?

Residents in Brazil on December 31, 2014 that have been or still are owners or holders of assets, goods or rights in periods prior to December 31, 2014.

Who cannot adhere?

(i)   Non-residents or non-domiciled in Brazil on December 31, 2014;

(ii)   Individuals convicted in criminal prosecutions regarding the crimes mentioned in (forgiven by) the Law;

(iii)  Holders of public positions, employment or functions, their spouses and blood relatives and in-laws, up to the second degree or adopted, at the time of the law's publication.

To what assets and rights is the amnesty applicable?

Only to those assets and rights originating from licit activities, understood to be those assets and rights acquired with resources arising from activities permitted or not prohibited by law, as well as the object, product or result of crimes amnestied by the Law.

What are the requirements to adhere?

Filing of a special statement and the payment of a 15% (income) tax and a 15% fine (30% in total).

What should be included in the statement?

The statement must include a detailed description of the funds, assets and rights owned on December 31, 2014 to be regularized, with their respective value stated in Brazilian Reais. In the case of non-existence account balance(s) or property rights on December 31, 2014, a description of actions taken by the individual that qualifies as among the crimes included in the amnesty as well as the assets and funds possessed must be made. More specifically, said description must include:

(i)  the declarant's identification;

(ii)   the necessary information to identify the funds, assets or rights to be regularized, as well as their owner and origin;

(iii)  the market value in Brazilian Reais of the funds, assets or rights of any specie that are declared;

(iv)  a statement that the assets or rights declared originated from licit economic activity.

The statement cannot be used as the only evidence for an investigative or criminal proceeding, or to support, directly or indirectly, an administrative proceeding of a tax or foreign exchange nature regarding the funds declared. In other words, authorities shall obtain information in addition to those declared to investigate or criminally prosecute the declarant.

How should the 15% tax and the 15% fine be calculated?

On the market value (converted to Brazilian Reais) of the goods and rights on the last business day of December 2014, according to the foreign exchange rate currency on that date.

This represents a significant advantage to taxpayers, as at that time the foreign exchange rate to the US Dollar was at approximately R$ 2.65, while at the time of this writing the rate is approximately R$4. This means that the effective aggregate cost of regularization is reduced from 30% to approximately 20%.

What else must be done following adherence?

The funds, assets and rights included in the statement must be informed in:

(i)    the income tax return for calendar year 2014 and following, in the case of individuals;

(ii)   a rectified statement to the Central Bank of assets and capital in foreign countries for calendar year 2014 and following, in the case of individuals and companies, if the same is so obligated; and

(iii)  Bookkeeping from the calendar year of the adherence and subsequently, in case of companies.

A voluntary disclosure with the payment of taxes and interest must also be made relative to 2015 earned income.

What are effects of the amnesty?

(i)   Extinction of all public administration obligations of a foreign exchange or financial nature relative to the ownership of declared assets;

(ii)   Remission of tax and a 100% reduction of fines and legal charges directly associated with these assets and rights in relation to taxable events up to December 31, 2014;

(iii)  Exclusion of the fine for the late or incomplete statement of capital owned abroad to the Central Bank of Brazil;

(iv)  Extinction of liability for numerous crimes, especially those of a tax nature or a social security nature, as well as tax evasion and money laundry (when the money laundry is associated with other crimes being amnestied).

Is it necessary to repatriate the funds (i.e., bring them back to Brazil)?


Who can be excluded from the amnesty?

The taxpayer presenting false statements or documents regarding the ownership and legal condition of funds, assets or rights, or in relation the documents demonstrating the market value of the assets.

What are the effects of exclusion?

Tax, fine and interest, deducting what was already paid, without prejudice to the application of the relevant civil, criminal and administrative penalties.

The initiation or continuation of investigative proceedings regarding the origin of the funds can only occur if there is documental evidence not related to the taxpayer's statement. In other words, the excluded individual cannot be investigated or prosecuted based solely on the information declared under the program.

For how long can the Federal Revenue Service audit the taxpayers?

For five years, during which time period the person should safekeep all documents supporting the statement.


Several items of the Law were vetoed, but none of great impact. For instance, the possibility of including in the amnesty jewelry, precious stones or metal, works of art and domestic pets or sporting animals, as well as the payment of the tax in installments relative to real estate.

The Law is welcome, but may generate controversy. We highlighted a few points that may be considered polemic.

Taxation and fine (30%) on income presumed as earned on December 31, 2014, including funds no longer available on that date:

One cannot presume the earning of income. The income tax must be levied on income actually earned within the statute of limitation period (of five years). When this period is over, the tax can no longer be collected, even within a settlement program. According to Brazilian law, tax cannot constitute a sanctioning of unlawful acts. After the adhesion to the program and payment of the tax, taxpayers might have the right to verify exactly when the respective taxable event occurred and plead restitution of amounts overpaid.

Resources held before December 31, 2014 but no longer existing on that date:

The mandatory inclusion in the statement and taxation of amounts no longer existing on December 31, 2014 may be a great disincentive to the adhesion as, in some cases, it will be impossible to recover the history of said amounts, possibly already spent a long time ago.

It is expected that the regulation soon to be published by the Federal Revenue Service – from the publication of which the time period of 210 days to adhere to the Law will be counted – will clarify these obscurities and facilitate the participation of taxpayers in the program. Thus, it is recommended that those wishing to adhere to the program await the regulation.

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.