Federal Revenue is keeping an eye on 1.3 billion euros that Brazilians have in Portugal

The articles written by the PÚBLICO Brasil team are written in the variant of the Portuguese language used in Brazil.

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The approval of the Special Regime for Exchange and Tax Regularization program (RERCT-General) by the Government of Brazil represents an opportunity for Brazilians with assets abroad adjust the situation with the Federal Revenue Service. It is possible to inform assets such as real estate, investments, shares in companies, brands and other rights. The program will be open until December 15, 2024.

Membership in the RERCT-General is voluntary. The special regime was created so that Brazilian taxpayers stay up to date with the Tax Authorities when reporting on assets and rights abroad, whose origin is lawfulbut which are wholly or partially declared incorrectly. The advantage of the program lies in the possibility of regularizing not only assets held abroad, but also those in Brazilian territory, avoiding severe fines and legal proceedings.

The assets covered by the regime include: bank deposits and financial instruments (investment fund shares, certificates of deposit); real estate; participation in companies (Brazilian or foreign); trademarks, patents and other intangible rights; vehicles, aircraft and vessels. If these assets are not declared, in the event of inspection, the burden of proving legality falls on the taxpayer.

The Federal Revenue sent PÚBLICO Brasil an exclusive study on the total volume of assets that Brazilians have in Portugal, which reach R$7.8 billion (1.3 billion euros). This means 0.5% of the Portuguese Gross Domestic Product (GDP).

There are 5,321 Brazilians who live in Portugal and declare Income Tax (IR) in Brazil. This represents 1% of the 500 thousand citizens who officially live in Portuguese territory. In other words, most Brazilians chose not to have a tax exit from Brazil, which keeps them subject to Brazilian laws. However, those who declare assets to the IRS have assets in Portugal worth around R$4.7 billion (783 million euros).

Advantages of the program

Marília Cavagni, lawyer and partner at CPPB Law, explains how the rules for joining the Special Exchange and Tax Regularization Regime Program work. The taxpayer must declare all assets and resources not correctly reported by the end of 2023. Regularized assets will be considered asset additions acquired on December 31, 2023, even if, on this date, there is no balance or title to the property.

“The taxpayer will have to pay a fine. This will result in the payment of 30% of the regularized amount, of which 15% is tax and 15% is charges”, explains the lawyer. But this amount is substantially lower than the penalty that would be charged in normal inspection cases, with rates of up to 27.5% for individuals and 34% for legal entities, in addition to interest and fines of up to 150% on the tax amount. due.

A Adherence to the program can be done electronicallythrough e-CAC (Federal Revenue Virtual Service Center). Taxpayers must present the Single Regularization Declaration, known as Dercat, together with the payment of tax and fine.

“Before submitting the declaration, it is recommended to prepare a dossier with documentation that proves the origin and legality of the assets to be regularized. This measure is essential to avoid complications in possible future inspections”, advises Marília.

For Marcelo Sobreira, senior advisor at 3J Capital Partners, the Government’s proposal makes sense. “Joining the program is voluntary and an opportunity for investors who have resources abroad to regularize their situation”, he states. He highlights another important point: in the case of real estate, you must consider the market value, the date of acquisition and the expectation of when and if you will sell them. With offices in São Paulo, Rio de Janeiro and Lisbon, the team 3J is based on providing personalized services to customers.

Consequences

For Brazilian investors with assets abroad, joining the RRCT-Geral avoids tax and criminal complications, guaranteeing peace of mind to continue investing in a safe and transparent way. It is recommended that each taxpayer seek qualified legal and tax assistance to assess the asset situation and ensure that the regularization is carried out correctly.

Lawyers warn that taxpayers who do not join the program by December 15 of this year and continue to have undeclared assets will face risks. Firstly, fines may be imposed that can reach 225% of the amount of tax due, in addition to late payment interest. Secondly, not declaring assets can constitute a crime against the tax system, leading to accusations of tax evasion and currency evasion. The IRS declined to comment on how these assets will be monitored or on possible penalties.

Vera (who did not want to give her full name for fear of reprisals from the IRS) is 60 years old. A resident of Braga, she reveals that, in her Income Tax, she does not declare the assets she acquired on Portuguese soil (an apartment and a car). In 2022, he sold two properties in Rio de Janeiro and used the proceeds to buy an apartment for 120 thousand euros (R$720 thousand) and a Fiat 500X. However, these assets are not included in the declaration to the Brazilian Federal Revenue Service.

Although he declares his retirement from Brazil in Portugal, Vera admits that she was not aware of the need to include the apartment and the vehicle in the income tax declaration. “My accountant in Brazil didn’t know either,” he says. Asked if she fears being fined for this, Vera says: “No one wants to pay tax, especially in my case, as I no longer live in Brazil. I want to pay tax in Portugal, not in Brazil.”

The Brazilian demonstrates frustration with the lack of clear guidance from the Federal Revenue Service for citizens living abroad. But, with the new exchange rate and tax regularization program, she is now considering regularizing her situation, although she still fears sanctions.

Fear for parents

Designer Carlos Eduardo (who also fears fines), aged 31, has lived in Portugal for nine years. He says he does not declare the assets he acquired in Portuguese lands in Brazilian Income Tax. The Brazilian bought an apartment five years ago. “I had no idea about the obligation to report to the Revenue. I thought that, because tax resident in PortugalI wouldn’t need to declare anything in Brazil”, he states.

Kauê, as he likes to be called, left Brazil as an intern and, since then, has built his career in Portugal. Therefore, he has not completed his income tax return since 2014, even though he has not left Brazil for tax purposes, which, by law, obliges him to report to the Brazilian tax authorities. “When I left Brazil, there were no large volumes of financial transactions”, he explains.

However, the fact that you have acquired a property in Portugal without definitively leaving Brazil puts you in a situation of fiscal risk. According to Brazilian rules, citizens who keep assets abroad need to declare these possessions, even if they no longer live in the country.

Kauê shows concern for his parents, who are in the same situation as him before the IRS. “They are retired in Brazil and live in Portugal. The two also bought an apartment, but they do not declare it on the Brazilian IR. This scares me, because they could be fined”, he says.