From October 1st, the international agreement signed by Brazil allows the Federal Revenue Service to access financial data of individuals and businesses in more than 90 countries. The date was set from the deposit of ratification instrument of the OECD, a document confirming the country’s participation in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
This Convention, signed by over 90 countries, is considered the broader international tax cooperation instrument. Through it, the countries will exchange information such as current accounts and their holders, investments, pensions, stocks, funds, income and interests.
For the experts, the agreement may encourage the addition of the contributors to the regularization program of assets abroad, permitted through the Repatriation Act.
Until May, 180 contributors joined the new regime. By law, natural or legal persons with legitimate heritage resources or not declared assets may regularize the situation by paying income taxes of 15% and a 15% penalty. The deadline for accession will be October 30th.
The Convention was signed by Brazil in 2011, during the summit of the G20 in Cannes (France), and approved by the Senate in January. In April this year went a step further with the publication of Legislative Decree 105 – which disclosed the approval of the text by the Senate – in the Official Gazette. For entry into force, however, it was still necessary to deposit the instrument of ratification.
Under the rules of the Convention, the agreement would enter into force on the first day of the month following a period of three months after the deposit. As was done in June, it was the date of October 1. This means that in practice, Brazil will be able to exchange information with the other signatory countries of the Convention this day.
This exchange of information, however, can be made by application to the country where the assets of Brazilian taxpayers are. Automatic exchange – the main mechanism of the Convention – will begin to be a fact only in 2018, with data from 2017.
There are two other formats of automatic exchange of information under the Convention. And, according to Araújo, this could start earlier in Brazil: in 2017 with data from 2016. One of these formats is called CBC (country by country). It is a report of the operations of the country made by multinational groups. “The goal is to combat erosion of the tax base and the displacement of profit,” says the coordinator of the Revenue Service.
This is because the multinationals are able to distribute operations and benefits among the countries in which they operate – that could be used as a way to save taxes. An estimated two-thirds of foreign trade operations in the world are intragroup (subsidiary in relation to the parent, or a third company of the same group that provides with the service or technology).
The exchange will allow governments to know, in fact, how much supposes the payment of taxes. It is estimated that three thousand groups in the world, with sales of more than 750 million euros are protected.
The other format that provides for the exchange of information in 2017 deals with the benefits offered by governments for a particular company operating in their country – without changes in the law. These administrative decisions will have to be informed in the exchange between countries. The impact of Brazil in this case, according to experts, will not be as expressive, as everything that surrounds an event generator tribute (date, rate and calculation basis) must be provided by law.