Originally published in the January 6 edition of World Tax Daily (Copyrights Tax Analysts)
Normative Instruction No. 985/09, which creates a special tax form to be filed by Brazil’s private health plan operators and HMOs, was published in the official gazette on December 23.
Because there is no limitation on medical expenses in Brazil, some taxpayers are tempted to declare more medical expenses than were actually incurred, with the sole purpose of receiving a larger tax refund. The new medical services return (declaração de serviços médicos, or Dmed) was developed to combat fraudulent medical deductions by individual taxpayers.
Health plans and HMOs will be required to disclose on the Dmed individuals’ tax ID numbers, amounts received (for health plans), and also amounts of medical expenses refunded to the taxpayer, if applicable. The Dmed must be filed annually, by the last business day of February of the year following the year to which the information applies. The first Dmed will be due in February 2011 (for the 2010 calendar year).
Health plans and HMOs that fail to file a Dmed or file late may be subject to penalties of BRL 5,000 (approximately $2,857) per month of delay, while omissions and misinformation in a Dmed will result in a penalty of 5 percent of the value of the transaction for which information is omitted, incorrect, or incomplete.
False information in a Dmed will be considered a crime against the tax administration despite the application of the aforementioned penalties.
David Roberto R. Soares da Silva