Doc 2009-21221 (1 pg)

Brazilian House Commission Approves Tax Amnesty for Undeclared

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Assets Held Abroad

by David Roberto R. Soares da Silva

The Finance and Taxation Commission of Brazil's Chamber of Deputies on

September 23 approved a law project that would grant tax amnesty for repatriation of
undeclared financial assets held abroad by Brazilian taxpayers (corporate and
individual).

Law Project 5,228/2005 was originally presented by lawmaker José Mentor in

2005 but was not reviewed until recently. The project was approved along with another
project, Law Project 113/2003, on the same subject.

The tax amnesty under Mentor's project would grant a favorable income tax rate
of 3 percent or 6 percent, depending on whether the funds are repatriated into Brazil
or kept abroad. For repatriated funds, the tax rate would be 3 percent; if the taxpayer
declares the funds but keeps them abroad, the rate would be 6 percent. That taxation
would be final, and those funds would not be taxed again in Brazil.

The project would grant full amnesty for any other tax related to the undeclared
funds, all applicable penalties, and interest. Legalization or repatriation of undeclared
funds enables corporate taxpayers to avoid the levy of the 25 percent corporate income
tax, 9 percent CSL (Social Contribution on Net Income), 7.6 percent COFINS
(Contribution for the Financing of Social Security) and 1.65 percent P.I.S (Program for
Social Integration contribution) on the undeclared funds. (For prior coverage of the law
project, see Doc 2005-11991 or 2005 WTD 105-5.)

The two projects will now go before the Commission of Constitution and Justice.
The commissions have conclusive powers, meaning that if the commission approves
the law project, it will be forwarded directly to the Senate with no need for a vote by
the chamber.

David Roberto R. Soares da Silva, tax partner, Azevedo Sette Advogados, São
Paulo