All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Brazil implements disclosure mechanism in the context of BEPS Action Plan 12

Following the trends of countries such as Spain and Mexico, among others, Brazil has begun to amend and introduce new legislation to reflect BEPS recommendations in its internal legislation.

Provisional Measure (PM) 685 was issued this month, determining a disclosure procedure as a result of BEPS Action Plan 12 (Mandatory Disclosure Rules).

PMs are presidential acts that take effect as ordinary law from the date of publication, but are then subject to congressional approval/amendment/rejection on a priority basis, within 60 days, renewable for another 60 days.

According to PM 685, the acts in the previous calendar-year involving transactions that result in tax suppression, reduction or deferral, must be declared by the taxpayer to the Federal Revenue Secretariat (RFB) by September 30 of each year, when: i) the acts do not involve relevant non-tax motivations (no business purpose); ii) the form chosen is not the usual one, uses an indirect contractual transaction or contains provision that modify, even partially, the effects of a typical contract (step-transaction doctrine); or iii) when involving contractual transactions listed in a resolution by the RFB.

The declaration shall not have the effect of a formal consultation (art. 8), the response to which has binding effect on the taxpayer.

Should the RFB not agree with the act or contractual transaction disclosed, the taxpayer will be summoned to pay (upfront or in installments), within 30 days, the amount of tax due, including interest but without fines (art. 9).

The form and procedures will be regulated in a specific resolution, to be issued by the RFB (art. 10).

Any declaration that contains false information, omissions, presented by a person extraneous to the fact or including a fraudulent interposition of companies or individuals, will be deemed ineffective (art. 11).

Failure to present the declaration or incurring one of the mentioned situations will characterize willful misconduct of the taxpayer, aiming to evade taxation or commit fraud, and will be subject to an aggravated fine of 150% of the tax not paid.

In the Brazilian administrative and judicial spheres, the tax authorities have frequently been disallowing acts based on the business purpose or step-transaction doctrines, with a relevant amount of success in assessments.

This movement increased, to some extent, when the Brazilian General Anti-Avoidance Rule was not converted into law, after being introduced by a PM in 2002 (PM 66).

Also, the current political scenario in the country indicates that the battle to approve the provisional measure may be a tough one. Therefore, this attempt to oblige taxpayers to disclose tax-driven planning may be extremely complicated to put effectively into force.

By André Gomes de Oliveira and Francisco Lisboa Moreira of CBSG

More from across our site

This week European Commission officials consider legal loopholes to secure minimum corporate taxation, while Cisco and Microsoft shareholders call for tax transparency.
The fast-food company’s tax settlement with French authorities strengthens the need for businesses to review their TP arrangements and documentation.
The full ALP model will be adopted through a new TP regime, which is set to boost the country’s investments and tax certainty.
Tax professionals have called on the UK government to reconsider its online sales tax as it would affect the economy at the worst time.
Tax professionals have called on companies to act urgently to meet e-invoicing compliance targets as the EU plans to ramp up digitisation.
In the wake of India’s ambitious 25-year plan for economic growth, ITR has partnered with leading tax commentators to discuss what the future will look like for India and for the rest of the world.
But experts cast doubt on HMRC's data and believe COVID-19 would have increased the revenue shortfall.
EY’s plan to separate its auditing and consulting businesses might lessen scrutiny from global regulators, but the brand identity could suffer, say sources.
Multinationals are asking world leaders to put a scale on carbon pricing to tackle climate change at the 48th G7 summit in Germany, from June 26 to 28.
The state secretary told the French press that the country continues to oppose pillar two’s global minimum tax rate following an Ecofin meeting last week.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree