Voluntary Disclosure Program in Brazil (RERCT) 2024

The Voluntary Disclosure Program in Brazil (RERCT – Regime Especial de Regularização Geral de Bens Cambial e Tributária) was established by Law No. 14.973 of September 16, 2024 (the Law). The program is regulated by Normative Instruction No. 2,221, of September 19, 2024, published by the Brazilian Federal Revenue Service (RFB – Receita Federal do Brasil).

This article explains the main aspects of participating in Brazil’s new Voluntary Disclosure Program for 2024.

The “RERCT” Program

As mentioned above, the “RERCT” program is the voluntary disclosure program of Brazil. The first program was established by Law No. 13.254 of January 13^th, 2016. This program allowed the regularization of assets of lawful origin kept abroad until December 31, 2014. It is important to note that it excluded assets kept in Brazil.

The new program allows taxpayers to regularize assets of lawful origin kept in Brazil or abroad, including repatriated assets. The aim of the program is to allow taxpayers to regularize undeclared or inaccurately declared assets held until December 31, 2023.

Eligibility for Participation in the “RERCT” Program

Individuals and legal entities resident or domiciled in Brazil on December 31, 2023, can participate in the RERCT. Non-residents, at the time of the publication of the Law, might also be eligible, if:

• They left Brazil after December 31, 2023, whether they have complied with all the exit formalities or not; and
• They left Brazil after December 31, 2022, didn’t comply with the exit formalities, and have been absent for more than 12 consecutive months.

The exit formalities include the Definitive Exit Communication (CSDP – Comunicação de Saída Definitiva do País, in Portuguese) and the Definitive Exit Declaration (DSDP – Declaração de Saída Definitiva do País, in Portuguese).

By law, there is no prohibition against joining the RERCT without these exit formalities. However, it is highly recommended to comply with all exit formalities before joining the RERCT. This way, individuals can keep their tax situation in Brazil regularized, avoiding future issues.

This Program is an excellent opportunity for individuals who, due to a lack of bureaucratic knowledge:

• Have failed to declare assets around the world and to pay the Brazilian income tax; and/or
• Need to review and regularize their tax situation in Brazil.

Participation process and deadline of the “RERCT” Program

To participate in the “RERCT” program, taxpayers need to submit a request using a specific document, DERCAT – Declaração de Regularização Cambial e Tributária.

Once the misreported assets are reported, the taxpayer must pay the following:

• 15% income tax on the value of the assets, and
• A fine equal to 100% of the income tax.

Thus, a total of 30% of the value declared and regularized will be paid to the RFB.

The value of the regularized assets will be calculated in the following manner:

• First, converting the foreign currency value to US dollars (USD), according to the price set for sale by the Central Bank of Brazil (BCB) on December 31, 2023;

• Then the amount should be converted to reais (BRL), according to the price set for sale by the BCB on December 31, 2023.

After the submission, the RFB has up to five years to review the request and the amount paid. Taxpayers can submit a request to participate in the “RERCT” program until December 15, 2024.

Exclusion from the “RERCT” Program

A taxpayer will be excluded if they have provided false information or documents regarding the assets. This will result in the payment of additional taxes, fines, and interest. The amounts previously paid will be deducted from the amount due.

An investigation of the assets’ origin can occur if there is documentary evidence that is unrelated to the declaration. An error in the declared amounts will not result in exclusion from the program. However, the taxpayer will have to pay the additional taxes and legal accruals within 30 days to avoid criminal punishment.

Regularizable Assets in the “RERCT” Program

The RERCT applies to all assets of lawful origin held on December 31, 2023, including:

• Bank deposits, certificates of deposits, shares of investment funds, financial instruments, insurance policies, investment certificates or capitalization operations, deposits in credit cards, retirement or pension funds;
• Loan operations with individuals or legal entities;
• Resources, assets, or rights of any nature arising from illegitimate or unauthorized exchange operations;
• Resources, assets, or rights of any nature, contributed to Brazilian or foreign companies in the form of shares, capital payment, capital contribution, or any other form of equity interest or right to participate in the capital of legal entities with or without legal personality;
• Intangible assets available in Brazil or abroad of any nature, such as trademarks, copyright, software, know-how, patents, and any and all rights subject to the royalty regime;
• Real estate in general or assets that represent rights over real estate; and
• Vehicles, aircraft, vessels, and other movable assets subject to registration in general, even in fiduciary alienation.

Benefits of the “RERCT” Program

If the conditions set by the law are met, the following will occur:

• Elimination of the punishability of certain asset declaration related tax crimes.
• The forgiveness of tax debts occurred due to non-compliance with tax obligations.
• A waiver of late payment fees.

Our firm specializes in International taxation and has vast experience in matters related to Voluntary Disclosure programs around the world. The firm includes highly qualified professionals, such as former officers of the Israel Tax Authority, CPAs, tax consultants, economists, and lawyers, including a lawyer registered with the Brazilian Bar Association.

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