Originally published in the December 31 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
As anticipated, Brazil’s Federal Revenue Department has created a new tax return to report taxpayers’ financial transactions. The new tax return was created by Normative Instruction 802/2007, published in Brazil’s official gazette of December 28, the last business day of 2007. The new return is effective as of January 1, 2008.
The tax return is definitely the best response found by Brazil’s executive branch to fight tax evasion after Congress rejected the extension of the 0.38 percent bank transactions tax (CPMF) to 2011.
The tax return is similar to that created in 2003 to report credit card transactions by credit card companies (Declaração de Operações com Cartões de Crédito, or DECRED). Financial institutions must disclose monthly financial transactions information that exceeds BRL 5,000 (approximately $ 2,840) for individuals and BRL 10,000 (approximately $5,680) for companies. The new tax return must be on a semiannual basis.
Normative Instruction 802 makes express reference to Complementary Law 105/2001 and Decree 4,889/2002 as its legal basis. These legal bases define “financial institutions” to include banks of any kind; stockbrokers; credit, financing, and investment companies; real estate credit companies; credit card companies (already subject to DECRED); leasing companies; credit cooperatives; savings and loan associations; stock, commodities, and futures exchanges; and clearing houses.
Also, Decree 4,889/02 includes the following transactions as eligible for reporting:
- for deposit accounts, including savings accounts: the sum of the amounts credited during the month;
- for payments made by check or in cash: the sum of the amounts debited in the account connected to those payments;
- for credit orders and similar transactions: the sum of the amounts debited in the account connected to those orders during the month;
- for withdrawal from deposit accounts, including savings accounts: the sum of the amounts debited in the account connected to those withdrawals;
- for loans and discounts of accounts receivables, promissory notes, and other credit instruments: the sum of the amounts debited and credited in the account connected to those loans and discounts;
- for purchases and sales of fixed and variable income bonds: the sum of the amounts in each type of transaction;
- for investment funds: the sum of the amounts invested during the month, segregated by type of fund;
- for purchases of foreign currency: the sum of the purchases during the month, in Brazilian currency;
- for conversions of foreign currency into Brazilian currency: the sum of the sales during the month, in Brazilian currency;
- for transfers of foreign currency and other valuables abroad: the sum, in Brazilian currency, of amounts transferred abroad during the month, taking into account all types of transfers;
- for purchases and sales of gold (defined as financial investments): the sum of purchases and sales carried on during the month; and
- for leasing transactions: the sum of payments, related to each contract, made by lessees during the month.
The Federal Revenue Department has said in a release that in January it will issue further regulations to clarify the form and deadlines for the new return.
David Roberto R. Soares da Silva