Federal Revenue Service publishes Normative Rulings that regulate the exchange of information between tax authorities – Country-by-Country Report (“CbC”) and Common Reporting Standard (“CRS”).

Federal Revenue Service publishes Normative Rulings that regulate the exchange of information between tax authorities – Country-by-Country Report (“CbC”) and Common Reporting Standard (“CRS”).

By the end of 2016, the Brazilian Federal Revenue Service (“RFB”) has published two relevant Normative Rulings with respect to the recent actions towards the transparency and exchange of information between the tax authorities of the world.

Country-by-Country Report

In the intention to align with Action 13 of the Base Erosion and Profit Shifting ("BEPS") project, Brazil signed on October 21st, 2016 the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (not yet approved by the National Congress). In order to regulate this Agreement, it was published on December 29th, 2016’s Official Gazette (“DOU”) the Normative Ruling RFB 1.681/2016, which provides for the obligation of filling the CbC Report by the final holding of multinational groups who are resident for tax purposes in Brazil and whose economic group has earned consolidated revenues higher than BRL 2.26 billion or EUR 750 million in the fiscal year prior to the fiscal year of the report. Through the CbC Report, RFB will have access to information aggregated by each jurisdiction the multinational group operates, comprising the following items: (i) consolidated revenues, segregating those obtained in transactions with related and unrelated parties; (ii) income or losses before income tax; (iii) income tax and, in the case of Brazil, also the amount of Social Contribution on Net Income paid; (iv) to the income tax due; (v) the capital stock; (vi) retained earnings; (vii) the number of employees, workers and other associates; and (viii) tangible assets different than cash and cash equivalents. In addition, the reporting entity shall identify (i) each entity that is a member of the multinational group, its jurisdiction of residence for tax purposes; (ii) the place of incorporation (only when the tax residence does not correspond to the place of incorporation) and (iii) the nature of its main economic activities. Multinational companies that are obliged to fill in the Country-by-Country Statement should provide information from the economic group to RFB, who will exchange this information with the other countries under the Multilateral Agreement of Competent Authority on the Exchange of Country-by-Country Reports.

Common Reporting Standard

Normative Ruling RFB 1.680/2016 was also published on December 29th, 2016, providing that the Brazilian financial institutions that are already obliged to transmit financial informations through e-Financeira (Normative Instruction RFB 1.571/2015) must provide for additional information on residents in countries that adhered to the CRS, such as the identification of the holders of bank accounts, its correspondent balance and amount of interests, dividends and incomes paid and received, among other information. CRS was developed in the context of the Global Forum on Transparency and Exchange of Information for Tax Purposes and is being adopted by many jurisdictions around the world with the goal to achieve the end of bank
secrecy by the exchange of financial information between tax authorities. In October 21st, 2016, with the signature of the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (not yet approved by the National Congress), Brazil officially joined the group of nearly a hundred jurisdictions that agreed to adhere to CRS. It is expected the first exchanges to occur as from 2017 with informations related to December 31 of 2016, but Brazil is inserted in the group of countries that compromised to start exchanging informations in 2018. By this Agreement, the RFB will receive financial information of Brazilian residents and will provide financial information of residents abroad to its correspondent origin jurisdictions. The Normative Ruling published recently will allow Brazil to collect the financial information that undertook to provide to the other jurisdictions that adhered the CRS.
This Issue was elaborated with collaboration of lawyers Fernando Colucci and Alina Miyake .