On August 25, 2015, Federal Decree No. 8506/2015 was published in the Official Gazette. This decree enacts the treaty signed in Brasilia on September 23, 2014, between Brazil and the United States to improve international tax compliance and implement the Foreign Account Tax Compliance Act (“FATCA”).
This Decree enacted an agreement of cooperation between Brazil and the United States to provide financial information on the citizens or companies of these countries. The sole purpose of the agreement is to identify and fight tax evasion, particularly in relation to US citizens and companies. In order to achieve the purpose of the agreement, it will be mandatory for financial institutions to file an annual return.
FATCA creates an obligation applicable to non-US financial institutions to report to the IRS financial information related to US citizens and companies as well as citizens and companies that appear to be from the United States. As mentioned above, the return will have to be submitted every year and contain information such as account number, account balance and all other data contemplated by the decree.
In the event of noncompliance with the agreement, a penalty will be applied to noncompliant financial institutions, consisting of the withholding of 30 percent of any payment that may be subject to US withholding tax made by a US source to any nonparticipating financial institution.