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New Brazilian Law Urges Repatriation of Taxable Offshore Assets

New Brazilian Law Urges Repatriation of Taxable Offshore Assets

With Brazil’s weak economy showing no sign of near-term recovery, government officials are considering options for shoring up declining tax revenue. One way they hope to do it is by encouraging citizens to bring back the taxable assets that they have stashed overseas. For a brief period of time, the government has changed its tax law to encourage repatriation of those overseas assets. President Dilma Rousseff signed the bill that grants amnesty to those who have undeclared offshore assets. In exchange for this amnesty, asset holders will be subject to taxes and fines.

The repatriation plan comes as Brazil’s inflation rate, now more than 10 percent, is at its highest level in the last 13 years, according to Agencia EFE. Meanwhile, the value of the Brazilian real in recent months has fallen considerably against the U.S. dollar. When the Senate approved the bill last year, officials projected the repatriation measure would help raise 11 billion reais, about $2.74 billion, in revenue, according to Reuters.

However, the new law might not bring the tax revenue totals that lawmakers originally envisioned. Rousseff vetoed parts of the bill that included jewelry, precious stones, artwork, and antiques. She also struck down the part of the bill that would allow people to pay their fines in installments. As reported by Reuters, those changes followed criticism that the original bill was already too weak on tax dodgers.

With the repatriation measure now law, those who repatriate assets from overseas will pay a one-time tax of 15 percent on the value of the reported assets, according to the Society of Trust and Estate Practitioners (STEP). Asset holders must also pay a penalty of the same amount. This payment will settle any outstanding tax debt. However, those who have already paid part of their tax obligations will not be reimbursed for any amounts that they already paid.

People who have assets overseas have limited time to take advantage of the new law. The amnesty opportunity closes 210 days from the law’s enactment by the Federal Revenue Bureau. That time window is even smaller than it appears because taxpayers cannot submit their declarations until the Bureau issues regulations providing additional details about the disclosure procedures. That means that asset holders have a short amount of time to make a decision. Either they can bring their assets back to Brazil and pay a fine, or they can keep those assets offshore and risk possible criminal prosecution by the government.