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Global Transparency – TIEA – Brazil & US Exchange Tax Information

Global Transparency - TIEA - Brazil & US Exchange Tax Information

On March 13, 2013, the U.S.-Brazil Tax Information Exchange Agreement (hereinafter TIEA) became effective. The TIEA was entered into between the two countries on March 20, 2007, but was pending ratification by the Brazilian Congress. On March 7, 2013 the Brazilian Senate’s foreign relations committee approved the TIEA and the Senate ultimately voted in favor of it the same day.

After approval by the President, the agreement will allow both governments to make inquiries and gather information regarding their citizen’s activities in the other country in an effort to combat tax evasion and money laundering. This is the first agreement of this kind entered into by Brazil and represents an important step towards cooperation between Brazil and the United States in the area of taxes; possibly leading to a tax treaty between the two countries.

How the TIEA Works

The TIEA establishes the means by which the tax authorities of the United States and Brazil may exchange information for the purposes of facilitating administration of both countries’ tax system and creating greater transparency. Each government shall provide upon request by the other government and when it is unable to obtain the requested information by other means, information regarding certain taxes.

In the case of the United States, they must provide the Brazilian government with information on the payment of federal income taxes, federal estate and gift taxes, federal excise taxes and taxes on self-employment income. In the case of Brazil, they must provide the U.S. government with information on individual and corporate income tax (IRPF and IRPJ respectively), the social contribution tax on net profits, certain company social security taxes, the country’s excise tax, the rural property tax and the financial operations tax.

The TIEA does not apply to taxes imposed by states, municipalities or other political subdivisions or possessions of the parties. In addition, the agreement allows either government to enter the territory of the other government to interview individuals and examine records pursuant to the law of the local jurisdiction. Once the TIEA has entered into force, it shall have effect for requests made on or after the date of entry into force, without regard to the taxable period to which the matter relates.