Brazil: Tax amnesty; disclosing tax-structured transactions

Brazil: Tax amnesty; tax-structured transactions

A tax amnesty program in Brazil has been established to allow taxpayers to resolve certain federal tax debts that accrued before 30 June 2015.

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Provisional Measure MP 685/2015 introduced the tax amnesty program (known as the “PRORELIT” program) and allows taxpayers to resolve all but those federal tax debts that are subject to installment payments. Applications for participation in the program must be submitted before 30 September 2015. In order to participate in the amnesty program, taxpayers must made a cash payment of at least 43% of their outstanding consolidated tax debt as accrued through 30 June 2015. The remaining 57% of the debt may be “settled” with net operating losses (NOLs). 

In Brazil, a Provisional Measure is an “act” issued by the president, with the authority of law until later approved by Congress. The Provisional Measure is effective as from its date of publication for 60 days, and it may be extended for an additional 60-day period (for a total of 120 days) on a request from Congress.

New disclosure obligations

Provisional Measure MP 685/2015 introduced a potential new tax filing obligation (known as “DLPAT”). This program requires Brazilian companies to report transactions conducted in the prior fiscal year that resulted in exclusion, reduction, or deferral of taxes, in the following cases:

  • Transactions lacking a non-tax business purpose
  • Transactions structured in such a manner, or containing clauses or structures that misrepresent, the typical effects of the contract
  • Any other transactions later specified by the tax authority (RFB) that involve certain identified actions or legal transactions

KPMG observation

The DLPAT filing appears to be an attempt to increase tax revenue in Brazil. Some believe that it may also be in response to the OECD’s BEPS Action 12 (Mandatory Disclosure Rules), even though Brazil is not a full member of the OECD.

 

Read a September 2015 report prepared by the KPMG member firm in Brazil: Tax News - Tax amnesty program (“PRORELIT”)

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