On September 23, 2014, the Brazilian Ministry of Finance
reported that Brazil and the United States have executed an
Intergovernmental Agreement (“IGA”) that should
facilitate the exchange of information between tax authorities of
both countries.
The IGA derives from the US rules of international fiscal
transparency (Foreign Account Tax Compliance Act, or
“FATCA”), and it is based on the Tax Information
Exchange Agreement previously signed by Brazil and the United
States, in force since March 19, 2013.
In accordance with the IGA, as from 2014, authorities of both
countries will automatically exchange information about bank
accounts and financial investments of US residents in Brazil and of
Brazilian residents in the US. The information must be exchanged
within nine months after the end of the calendar-year to which the
information relates.
The IGA was executed under the so-called “Model 1”
adopted by the US, which means that Brazilian financial
institutions and other Brazilian entities qualified by the FATCA
legislation as “Foreign Financial Institutions”
(“FFI”) will not supply, directly, any information
about their clients to the US Treasury, but rather to Brazilian
authorities, which will compile the data and send it to US
authorities.
Given that the IGA establishes reciprocity from the US Government,
Brazil will start receiving information about bank accounts and
financial investments held in the US by Brazilian residents
(including individuals and legal entities). This will give
Brazilian tax authorities one more source of information to
cross-check the compliance of Brazilian tax rules by taxpayers
investing in the US. As a result, these investors should revisit
their tax obligations to avoid future tax assessments.
The IGA/FATCA is only the first step involving the automatic
exchange of information among Brazil and other countries. Brazil is
part of the "Early Adopters" group for the automatic
exchange of tax information, comprised of 44 countries so far.
Although this group will start the automatic exchange in 2017,
Brazil has announced that intends to implement it by 2018.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.