Did you happen to miss our webinar covering the basics of Brazilian taxation?
Curious to know about what is trending in Latin America’s largest economy when it comes to all-things tax?
In that case, make sure you have a look at the full transcript for our webinar on Brazil, which took place on July 20th and answered eleven questions on many aspects to be dealt with when operating in this South American country.
Plenty of thanks to both Ronaldo Apelbaum and Rogerio Leite Araujo for taking the time to talk to Taxlinked members about Brazil and providing us with a wealth of information.
Please feel free to download the full transcript below.
And here are some of the webinar’s main highlights. Happy reading!
To what extent is Brazil willing to collaborate with the OECD in order to join the organization? What's the relationship between Brazil and the OECD? What is Brazil doing in terms of trying to access the OECD?
Ronaldo Apelbaum: “It's very funny when you analyze the relationship, because in all this BEPS discussion that we’ve had in the last few years, Brazil was part of it. We decided to…work along with the countries to make the changes that we are seeing now in BEPS. But this does not mean that Brazil really wants to change its internal legislation...We are choosing what’s relevant in BEPS, what we should accept or not.”
“To give you an idea, now we have county-by-country reporting. That's fine. That does not change the way we tax people and companies in Brazil, so let's introduce that. But, on the other hand, for instance, transfer pricing. All the legislation, all the rules pertaining to transfer pricing here in Brazil, they are not the way OECD recommends. And we don't want to change that. So if it's going to reduce, for some reason, our tax burden, we don't work with that. If it's only to create new rules and tax obligations to provide data, then Brazil will do the homework.”
How are transfer pricing laws in Brazil and how do they differ from those espoused by the OECD?
Ronaldo Apelbaum: “I think the main difference between the transfer pricing regulations that we have here and those in the other places is that we are not open to reviewing the percentage that is applied on production… Brazil’s legislation and tax authorities…do not keep in mind what really happens in the market… What we hear from other countries is that you can knock on the door of the tax authorities and say, ‘This really does not make sense. I can show you the numbers. I can show you the documents and let's create a special rule for my market.’ In Brazil, this does not happen. The same applies for everybody.”
Let’s take a closer look at the electronic tax system and how it has operated or how successful it has been. Any insight?
Rogerio Leite Araujo: “It helps a lot in terms of enhancing compliance in Brazil. The government was able to raise the tax collection in terms of indirect tax… The biggest challenge for the taxpayer in Brazil is to anticipate the problems we may face through the data that we submit on a daily basis to the government. The government is able now to get that data, crosscheck it with the tax returns, the invoices and the other auxiliary recommendations, and immediately issue a notice to the taxpayer if they find any inconsistencies. You are going to receive the notice on a daily basis if the government finds those inconsistencies…You must have a good system to do this crosscheck prior to the submission of any tax return. If it's also possible, before you issue an invoice, observing all those parameters required because we have a lot of tax codes that we need to complete in the invoice, and they are very critical and each one corresponds to a specific tax.”
The tax compliance program named “Nos Conformes” in the state of São Paulo. It’s a groundbreaking tax compliance program intended to foster tax compliance and transparency by rating taxpayers according to their tax behavior. Any thoughts?
Rogerio Leite Araujo: “The purpose of ‘Nos Conformes,’ I think, is to have more transparency between taxpayer and tax authorities and to promote this good relationship between each other. I would mention that in some countries that I deal with—for example, Mexico—the tax authorities, before issuing a tax assessment, they are going to discuss with the taxpayer and ask him for more clarification. During this period, the taxpayer is allowed to rectify the information or to pay the taxes that he owes without any penalty and without any further consequences. I believe this program was put in place to achieve that target.”
Ronaldo Apelbaum: “What is more important is that it’s a first step in Brazil that shows that taxpayers can be treated differently. So if you are a good taxpayer and you make a mistake, you'll be better treated by tax authorities than if you are a company that does not pay taxes and tries to hide all information from tax authorities. So this is good.”
How active are the Brazilian tax authorities in the enforcement efforts against taxpayers who utilize offshore structures?
Ronaldo Apelbaum: “They're starting to look at that, and here with the Lava Jato (Operation Car Wash) and all the other federal investigations, this is something that's on the top of the mind of people. Everybody's really careful about offshore investments...you need to put that on your declaration, on your income tax return, because they are finding information and they are receiving a lot of information about offshore companies. But there is one thing that's extremely relevant because people make a lot of confusion of that. It's not illegal to use offshore companies here in Brazil…the only thing that you have to do is not to hide information.”
Can the income tax on offshore income be deferred until the offshore asset is dropped or disposed?
Rogerio Leite Araujo: “What I have seen is that the Brazilian government is requesting for the taxpayers that have properties abroad to recognize that this profit is taxable at the moment that it's declared in the accounting statements. It’s not only he pays or he clearly remits the dividends. So I don't think it's possible to defer.”
Make sure to download the full transcript HERE.