Originally published on the March 21 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
In Circular 3,345/2007, published in the official gazette on March 19, Brazil’s Central Bank has established a filing period of March 19 through May 31 for the mandatory reporting of foreign assets for those with foreign assets worth at least US $100,000 (approximately BRL $210,000), or the equivalent amount in other currencies, as of December 31, 2006.
In addition to the legal obligation to file annual income tax returns, Brazilian individuals and companies with substantial foreign assets must file an annual return (Declaração Eletrônicados Capitais Brasileirosno Exterior, or CBE) with Brazil’s Central Bank, declaring all foreign assets held during the preceding year.
The information reported in the CBE must be divided into the following categories:
- deposits abroad;
- cash loans;
- financing;
- operational and financial leasing;
- direct investments;
- portfolio investments;
- investments in derivatives; and
other investments, including real estate and other assets.
This is the sixth edition of the CBE; the first of which related to tax year 2001 and was filed in 2002. CBE data filed in 2006 showed that 12,366 Brazilian individuals and companies held US $111.7 billion of assets outside the country, US $87.4 billion of which was held by companies, with individuals holding the remaining US $24.3 billion. Those funds were invested in 140 different countries, according to Brazil’s Central Bank.
A Central Bank press release points out that the 2007 edition of the CBE for the first time requires taxpayers to disclose not only the first destination of funds remitted out of Brazil, but also the funds’ final destination. The CBE provides an example in which a company invests in a plant in country A, but the funds are first sent to a holding company located in country B. In the 2007 CBE, the taxpayer will be required to disclose the first destination of investments in country B, as well as the final destination in country A. Until 2006, taxpayers were required to disclose only the immediate destination of their funds held outside Brazil.
Article 7 of Circular 3,345 provides that any filing made after July 31 will be considered a failure to file and will subject the taxpayer to penalties of up to BRL 250,000 (approximately US $120,000).
David Roberto R. Soares da Silva