EN 
BR Many of our clients are aware of the need to declare assets abroad to the Federal Revenue Service (RFB) through the annual tax return (DAA, the "normal" income tax return). Few, however, are accustomed to the obligation to report the same assets abroad to the Central Bank through the Brazilian Capital Abroad Declaration (CBE).
The purpose of this text on how to declare assets abroad is to describe which assets must be declared and under what conditions an individual may be obliged to file the two declarations. In particular, it is important to inform you of the administrative fines applicable for failure to comply with the obligations to file the DAA and CBE. We have already touched on this subject when dealing with the consequences of not delivering the Declaration of Final Departure from the CountryBut here we will focus more on what must be declared.
Obligation to declare assets abroad in the DAA
The Annual Adjustment Declaration (DAA) is a declaration that aims to determine the taxpayer's increase in assets during an annual period, on which the income tax due should be calculated. This declaration must be submitted in March and April of each year by individuals who are tax residents in Brazil and meet specific mandatory requirements.
With regard to their assets, the individual required to file the DAA must inform the following items in the assets and rights section of the declaration:
| Type of asset and right | Mandatory to declare if, on December 31st of the calendar year of the declaration: |
|---|---|
| All the shares and quotas of the same company, whether or not traded on the stock exchange, and gold financial asset | Incorporation or acquisition value equal to or greater than R$ 1,000.00 |
| Bank current account balances and other financial investments | Unit value exceeds R$ 140.00 |
| Other movable property and rights | Unit purchase value equal to or greater than R$ 5,000.00 |
| Real estate, motor vehicles, boats and aircraft | Regardless of the purchase price |
| Debts and liens | Amounts above R$ 5,000.00 |
Thus, for example, if the balance of a bank account is equal to or less than R$ 140, the taxpayer will not be obliged to report it, even if they are obliged to file an annual tax return.
When declaring assets abroad, it is necessary to inform the values on December 31 of the calendar year of the declaration and on December 31 of the immediately preceding calendar year. Accordingly, for the declaration to be filed in 2020, the asset position on December 31, 2019 (calendar year of the declaration) and December 31, 2018 (previous year) must be reported.
The above rules apply both to declaring assets abroad and to declaring assets located in Brazil. For assets abroad denominated in foreign currency, the amounts to be reported on the assets and rights sheet must be converted into Brazilian reais using specific exchange rates:
| Type of asset or right | How to declare assets abroad |
|---|---|
| Non-interest-bearing deposits | convert the balance on December 31 at the buying exchange rate published by the Central Bank |
| Foreign currency in kind | calculate the weighted average cost of the foreign currency stock, and convert it into the average monthly US dollar exchange rate for sale, as published by the RFB |
| Financial applications | calculate the acquisition cost, adjusted for each application, settlement or redemption, and convert it at the selling exchange rate published by the Central Bank for each acquisition date |
| Other assets and rights | calculate the acquisition cost and convert at the selling exchange rate published by the Central Bank for the acquisition date |
| Debts and liens | calculate the balance on December 31, and convert it at the buying rate published by the Central Bank |
As you can see, the legislation has provided for very different ways of calculating the value in reais of the assets and rights reported when declaring assets abroad in the DAA. The most common mistake we find is to treat all the assets in the declaration as if they were non-interest-bearing deposits, i.e. to convert the value into foreign currency at the exchange rate on December 31st of the year of the declaration. In years of very significant exchange rate fluctuations, this can mean recording an increase in assets in the DAA that has no origin in the taxpayer's income.
Missing the deadline for submitting the DAA will result in a fine of (i). R$ 165.74; or, if higher, (ii). of 1% of the amount of tax due per month of delay, up to a limit of 20%. The amount of tax due is that reported on the return filed late. The aforementioned fine does not exclude the taxpayer's liability for the payment of any tax and legal increases for the delay.
It's worth mentioning that this fine only applies if you don't file a return within the legal deadline. If a declaration was filed on time, but had to be rectified, the fine does not apply.
Obligation to declare assets abroad at the CBE
The CBE is a declaration created for statistical purposes, with the aim of allowing the Central Bank to estimate the need to maintain foreign currency reserves to honor external commitments. Both the DAA and the CBE must be filed by tax residents in Brazil, but there are some important differences that make filling in the CBE simpler:
- who is obliged to deliver: the CBE must be submitted by individuals and companies, while the DAA is submitted only by individuals (companies are subject to submitting their own declarations to the tax authorities);
- what should be informed: Unlike the DAA, only assets and rights located abroad must be reported on the CBE, and debts and encumbrances in rem must not be reported;
- currency to be reported: In the CBE, assets are reported in their original currency, without converting the values to reais;
- equity position: Only the declarant's asset position on the base date is of interest, not the gains and losses on assets that occurred during the period. Thus, if the declarant had a bank account and it was closed during the year, so that on December 31st of the year of the declaration there was no balance left, the item should not be reported. There is no comparison with the assets situation on December 31st of the previous year.
Every year, the Central Bank publishes the criteria used to identify which assets should be reported when declaring assets abroad and how to determine their value, through the Declarant's Manual (the most recent one, referring to the 2021 annual CBE, to be submitted in 2022, is available here). at this link). In general, assets should be reported at their market value, unless otherwise stated.
Submission of the CBE is mandatory if the total value of the assets located abroad in the name of the tax resident in Brazil is equal to or greater than US$ 1,000,000 (annual declaration) or US$ 100,000,000 (quarterly declaration) or its equivalent in other currencies. The deadlines for submitting the CBE are as follows:
| Base date | Type of CBE | Deadline for delivery |
|---|---|---|
| March 31st | Quarterly | between April 30 and June 5, at 6 p.m. |
| June 30th | Quarterly | between July 31 and September 5, at 6 p.m. |
| September 30th | Quarterly | between October 31 and December 5, at 6 p.m. |
| December 31st | Annual and Quarterly | between February 15 and April 5 of the following year, at 6 p.m. |
The above deadlines are general, and may be extended to the first following working day if they coincide with a day on which the Central Bank has no working hours or if working hours are closed before 6pm. Each year, the Central Bank publishes the exact dates depending on whether or not these events occur.
Failure to comply with the delivery deadline and other obligations relating to the completion of the CBE is subject to the following administrative penalties:
| Fine (percentage of the amount subject to declaration) | Limit per CBE declaration | Cause |
|---|---|---|
| 1% | R$ 25,000 | Failure to meet the delivery deadline. This may be reduced if the delay is between 1 and 30 days (90% discount) or between 31 and 60 days (50% discount). |
| 2% | R$ 50,000 | Incorrect or incomplete provision of information |
| 5% | R$ 125,000 | Failure to deliver or submit supporting documentation to the Central Bank |
| 10% | R$ 250,000 | Providing false information to the Central Bank |
The first three fines above may be increased by 50% (fifty percent) in cases where the declarant fails to make, correct or supplement the declaration when requested by the Central Bank. The documentation supporting the information provided through the CBE must be kept by those responsible for providing the information for a period of 5 years, counting from the base date of the declaration.
The main error we find is that clients are unaware of the existence of the CBE and the delivery deadlines, which exposes them to the aforementioned fines for missing or late deliveries. There is also the possibility of errors in filling in the values. In this case, unlike the DIRPF, if a CBE is submitted on time and rectified after the deadline, the 1% fine will be levied on any positive difference between the two CBEs submitted.
Declaring assets abroad: conclusions
Based on our experience, we can say that the main mistakes made by taxpayers who keep assets abroad are the following:
- Failing to declare assets abroad in the DAA: Most people simply assume that they have to declare in Brazil what they have in Brazil and abroad what they have abroad. This is not true;
- Declare assets abroad in the DAA as if they were non-interest-bearing deposits: is the easiest, but incorrect, solution. Each type of asset or right must be declared in a different way, usually according to the acquisition cost, without updating to market value. This is a mistake we see most often in the work of accountants who are not familiar with the subject;
- Forgetting that the CBE exists: The CBE must be filed with the Central Bank, but because it is not an income tax return, few people know that it exists. Not only does it exist, but the fines for late filing are high and, at the very least, failure to file this declaration is a crime. can have criminal consequences.
These issues should always be taken with care, so as not to generate undue exposure for those who want to do things properly.
On this blog you will always find relevant, up-to-date information on the subject and guidance on how to avoid problems with the tax authorities and other authorities. Feel free to tell us about your experience, share the content with other friends who need guidance and contact us by e-mail at contato@tersi.adv.br or via WhatsApp. Click here to send a message now.
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