Friday, 20 January 2017

Brazil: Consultations launched on ruling exchanges and CRS

Brazil’s tax authorities and the Ministry of Finance have released two public consultation documents: one on 29 November 2016 that contains measures relating to the exchange of rulings between tax authorities, as recommended under action 5 of the OECD BEPS project, and another on 7 December that contains measures to implement the OECD recommendations regarding the common reporting standards (CRS). The contents of both consultation documents will be included in normative rulings (NR) that will be issued after the consultation periods end on 16 December 2016.

Exchange of rulings
The first consultation document contains a proposed new article that would be included in NR 1,396/2013, which regulates ruling procedures. Rulings on transfer pricing, permanent establishments and certain research and development incentives would be subject to the mandatory exchange of information with other tax authorities. Private letter rulings, resolution acts and interpretative acts would fall within the scope of the exchange of information.

Based on the new article to be included in NR 1,396, taxpayers would be required to disclose the following additional information when requesting a ruling from the Brazilian authorities:

  • Direct and ultimate controlling party, as well as the place of residence of the controlling party;
  • Countries of residence of all related parties with whom any transactions that are part of the request are carried out; and
  • Country of residence of the head office and permanent establishment (if applicable).

For rulings issued after 1 January 2010, taxpayers may be requested to produce such additional information.

A summary of the ruling issued by the Brazilian tax authorities would be provided to the tax authorities of the countries involved in situations where Brazil has an exchange of information agreement with the relevant countries.

Common reporting standards
The consultation document on CRS contains the text of a new NR that would provide guidance to financial institutions that are required to file Brazil’s financial information return (e-financeira return). The e-financeira was introduced in 2015 for reporting financial information on entities and individuals, including information necessary to comply with the US Foreign Account Tax Compliance Act. The return has been mandatory for financial institutions since 1 December 2015.

The consultation document contains guidance on how to identify, classify and report information subject to the automatic exchange, in the context of the CRS. As per the consultation document, Brazil intends to commence automatic exchanges of financial account information in 2018, regarding data relating to fiscal year 2017.

Source: Deloitte