What you and your company need to know about BACEN Returns?
Monthly and annual returns of many ancillary tax obligations are already a routine for most Brazilian companies.
Usually, we discuss that such mandatory attribute makes tax authorities’ work easier during inspection processes, which oftentimes lead to notice assessments. In a way, the taxpayer sometimes produces evidence against itself.
In this complex scenario where information technology has become necessary to companies’ daily tax practices, the Government, by using its search agencies, constantly finds and implements new obligations to be prepared by the taxpayers, promoting transparency and coherence of information on most diverse levels.
It is the same for mandatory information and returns for BACEN (Brazilian Central Bank).
In this sphere BACEN focuses on the amounts invested in Brazil by non-residents, as well as in values remitted abroad by Brazilians (individuals and/or legal entities).
Although not much publicized and/or known, for years BACEN has implanted in Brazil the Annual Return of Brazilian Capitals Abroad (CBE) and the Foreign Capital Flow Control.
The Annual Return of Brazilian Capitals Abroad applicable to individuals and legal entities domiciled in Brazil that have assets against non-residents, in values over USD 100,000.00 (one hundred thousand United States dollars), calculated in the base-date of December 31, 2017. The deadline to send
the annual CBE Return is until April 5, 2018.
CBE will also be mandatory quarterly when assets against non-residents are equal or over USD 100,000,000.00 (one hundred million United States dollars), calculated on the basedate of March 31, June 30 and September 30 of each year.
This year, CBE went through meaningful changes; one of them is the requirement of further information related to participation on companies’ capital abroad and the revenue of exportation kept and paid abroad, pursuant to the rules.
Related to the investment on foreign company, the tax return now requires: (i) method of appraisal of investment (be it stock on the market, assessment by specialist, deducted cash flow, recent negotiation or value of net equity); (ii) percentage of participation with voting power rights; (iii) total value of assets and current liabilities of the company; and (iv) information of indirect subsidiaries.
The Brazilian Central Bank had already made a similar change to quarterly tax returns by demanding information on indirect subsidiaries. Due to this, direct investments in companies in which the direct investee abroad has representative participation on control now have to be reported on the annual
The same is true for investment funds in which the taxpayer holds participation equal or over 10% of the fund’s capital; in that case, they must inform direct and indirect company shares subject to control by part of the fund.
Besides, legal entities that export goods that have been paid directly abroad for export of such goods (export of services not included) in an amount equal or over USD 10 million, must inform the total value received and where these resources are destined to abroad, among other categories to be presented.
The Annual Control, which is due on August 15, includes the following legal entities and their position as of December 31 of each base-year: (i) legal entities headquartered in Brazil, with direct participation of non-residents in its capital, in any amount, and with shareholders’ equity equal or over USD 100 million; (ii) investment funds with non-resident shareholders and shareholders’ equity equal or over USD 100 million; and (iii) legal entities headquartered in Brazil, with a total balance of short-term commercial credits (payable within 360 days) granted by non-residents equal or over than USD 10 million.
The novelty, introduced by Circular Letter nº 3.814/16, changed the registration of Foreign Direct Investment (FDI) in the Electronic Declaratory Register (RDE) and established that further declaration are mandatory for legal entities with nonresidents’ participation in the capital stock.
Article 34-B of the Circular Letter established that the new tax return should be made annually for companies with assets or shareholders’ equity of less than BRL 250,000,000.00 (two hundred and fifty million Brazilian Reais) and quarterly for companies with assets or shareholders’ equity over BRL
250,000,000.00 (two hundred and fifty million Brazilian Reais).
To this end, in the first case, the annual tax return must be made until March 31, 2018, regarding the equity situation of December 31, 2017. For other cases, the quarterly tax returns will be presented until March 31, June 30, September 30 and December 31, related to the equity situation of the last day of the quarter immediately before.
It should be noted that this obligation is in line with the need for corporate actions of companies to converge with foreign capital registered in BACEN, a situation that is often forgotten by companies.
Finally, it is important to note that the lack/omission of the provision of any of the returns above or, also, the presentation of false, incomplete, incorrect or outdated information is subject to the following penalties: (i) to register or present the return after the deadlines set forth in the respective standards: 1% (one percent) of the value subject to registration or return, limited to BRL 25,000.00 (twenty-five thousand Brazilian Reais); (ii) to provide incorrect
or incomplete information: 2% (two percent) of the value subject to registration or return, limited to BRL 50,000.00 (fifty thousand Brazilian Reais); (iii) not to register, nor presenting the return or not presenting supporting documentation of the information provided to the Brazilian Central Bank:
5% (five percent) of the value subject to registration or return, limited to BRL 125,000.00 (one hundred twenty-five thousand Brazilian Reais); and (iv) to provide false information in registration or return: 10% (ten percent) of the amount subject to registration or return, limited to BRL 250,000.00
(two hundred and fifty thousand Brazilian Reais).
To date, the penalties or obstacles found by taxpayers are unknown, but surely such obstacles must be observed in companies’ day-to-day operations.