Originally published in the September 25 edition of World Tax Daily (Copyrights Tax Analysts)
The Finance and Taxation Commission of Brazil’s Chamber of Deputies on September 23 approved a law project that would grant tax amnesty for repatriation of undeclared financial assets held abroad by Brazilian taxpayers (corporate and individual).
Law Project 5,228/2005 was originally presented by lawmaker José Mentor in 2005 but was not reviewed until recently. The project was approved along with another project, Law Project 113/2003, on the same subject.
The tax amnesty under Mentor’s project would grant a favorable income tax rate of 3 percent or 6 percent, depending on whether the funds are repatriated into Brazil or kept abroad. For repatriated funds, the tax rate would be 3 percent; if the taxpayer declares the funds but keeps them abroad, the rate would be 6 percent. That taxation would be final, and those funds would not be taxed again in Brazil.
The project would grant full amnesty for any other tax related to the undeclared funds, all applicable penalties, and interest.
Legalization or repatriation of undeclared funds enables corporate taxpayers to avoid the levy of the 25 percent corporate income tax, 9 percent CSL (Social Contribution on Net Income), 7.6 percent COFINS (Contribution for the Financing of Social Security) and 1.65 percent P.I.S (Program for Social Integration contribution) on the undeclared funds.
The two projects will now go before the Commission of Constitution and Justice. The commissions have conclusive powers, meaning that if the commission approves the law project, it will be forwarded directly to the Senate with no need for a vote by the chamber.
David Roberto R. Soares da Silva