Posted in Hot Topics on September 21, 2017
The Brazil Offshore Voluntary Disclosure Program (OVDP)
Countries throughout the world have spent years cracking down on tax evasion, and taxing authorities continue to take aggressive steps to find those who have undeclared offshore accounts for the purposes of evading income tax liability.
The United States and Brazil are both among the many countries aiming to fight evasion of tax obligations. Brazil and the U.S. are signatories to the Foreign Account Tax Compliance Act, which is an intergovernmental agreement facilitating the exchange of taxpayer information. Brazil has also announced it will begin global tax compliance under the Common Reporting Standard.
In addition to reporting information about tax evaders to home countries, many locations – including the U.S. and Brazil – have taken steps to encourage taxpayers to come forward and report their own failures to declare their offshore accounts. Programs encouraging voluntary disclosure, known as Offshore Voluntary Disclosure Programs (OVDPs), generally work by allowing a taxpayer to limit potential penalties and consequences by admitting to a failure to comply with the rules. However, taxpayers should not take part in any voluntary disclosure programs without first talking to an experienced tax lawyer to understand the potential risks because under certain circumstances, OVDP participation does not remove the threat of criminal prosecution nor limit financial penalties for taxpayers.
Regardless of whether you reside in the U.S. or Brazil, if you are not in compliance with your U.S. tax obligations, you should reach out to an experienced tax attorney right away to find out if there is an option for voluntary disclosure in your area and to learn whether it is the right option for your individual situation. For those in Brazil, for example, a voluntary disclosure program was created that shared similarities to the one in the U.S., but with a different name and different rules.
Understanding the Brazilian OVDP and Why It’s Important to Speak With a Tax Lawyer
In March of 2015, taxing authorities in Brazil established a Special Regime for Tax and Exchange Regularization when they issued Normative Instruction 1627.
The Special Regime in Brazil makes it possible for those who did not previously report offshore accounts in accordance with requirements to come forward voluntarily. Those who come forward can remedy their past wrong by telling taxing authorities not just about offshore accounts they did not report, but also about offshore accounts they reported incorrectly.
Those who wished to participate in the Brazilian OVDP, which is similar to the U.S. OVDP, will need to file certain forms, including a Declaration of Tax and Exchange Regulation. A penalty will be assessed on foreign assets in undeclared offshore accounts and on income that went unreported.
Brazil is one of many countries incentivizing tax evaders to come forward so as to mitigate and minimize penalties. The trend is likely to continue, especially as the U.S. OVDP has encouraged many taxpayers to admit to failures to follow FATCA and FBAR requirements with the incentive of limiting potential penalties.
Kevin E. Thorn, Managing Partner of Thorn Law Group, has extensive experience helping clients with offshore voluntary disclosures and is known throughout the world. If you would like assistance with understanding the Brazil OVDP (or the U.S. OVDP), learning whether or not you are eligible and submitting the necessary forms to participate, we can assist you. Our firm has helped hundreds of clients participate in both domestic and foreign OVDPs and we continue to provide advice on an international scale to those who both need and can benefit from the services that skilled tax lawyers can offer. To find out more about the voluntary disclosure programs you may be eligible for and the penalties we can help you avoid, contact Kevin E. Thorn, Managing Partner of Thorn Law Group, today at (202) 349-4033. We are located at 1602 L Street, NW, Ste 401, Washington, DC 20036.