EN 
BR In a specific provision of the SRF Normative Instruction no. 208/2002The term "temporary exit" is used. This situation applies to a person who did not formalize their definitive departure when they actually left the country, and will therefore have their tax residency in Brazil extended for a further 12 months after they have physically left Brazilian territory. From then on, the person must be treated as a non-resident.
Does this mean that there is a "Declaration of Temporary Departure from the Country" to submit? If the taxpayer still wants to be a tax resident in Brazil, do they need to travel to Brazil once a year to avoid completing the 12-month period?
Not quite. Firstly, because it is only compulsory to submit the "Declaration of Final Departure from the Country" (DSDP)It doesn't matter whether the tax exit uses the "temporary exit" rule or not. Furthermore, despite the normative provision, recognition of temporary release is not automatic.
The aim of this text is to provide answers to the questions that arise from the 12-month deadline, especially for those who find themselves in one of the following situations:
- left Brazil more than 5 years ago and never formalized his final departure from Brazil, nor filed income tax returns after leaving; or
- filed an income tax return for the last 5 years, up to the year you left Brazilbut has never submitted the declaration of definitive departure from Brazil or any other declaration since leaving the country; or
- who recently left Brazil and doesn't know if it's more suitable formalize their tax exit by the "definitive exit" or "temporary exit" rule.
It is hoped that this will clear up doubts, especially about the "automatic" loss of tax resident status in Brazil, especially when you want to know if someone lives in dual tax residence.
Why the false idea of a "Declaration of Temporary Departure from the Country"?
The various legal provisions that deal with tax residency in Brazil are disjointed over time and therefore do not always form a clear logical coherence. The Declaration of Definitive Departure from the Country (DSDP) was provided for by a law from the 1950s, whereby those who leave Brazilian territory "permanently" must present this declaration, after which they will be treated as non-residents1Law 3.470/1958 art. 17, Caption..
What the Federal Revenue Service calls "temporary departure" is a provision from the 1940s. Under it, "residents of the country who are absent abroad for more than twelve months" are taxed as non-residents2Decree-Law 5.844/1943, art. 97, Captionparagraph "b"..
This wording is very confusing, because it gives the impression that a person is still a tax resident of Brazil, they just start paying taxes as if they were not. It's even more difficult to understand how this provision compares with the situation of diplomats and other people absent abroad in the service of the country, who continue to be treated as tax residents in Brazil even after 12 months of absence3Law 9.250/1995Article 5, Caption.or cases in which tax residency is maintained for people who move to countries or dependencies that are considered "tax havens" (favored tax jurisdictions) or in a privileged tax regime.4Law 12.249/2010, art. 27..
The executive branch offers some clarification in its regulations on the subject. It states that the "twelve-month rule" applies to those who left the country without submitting the DSDP. In other words: if a person submits the DSDP according to the general rule of the 1950s, they will already be taxed as a non-resident from the date they left the country. On the other hand, those who fail to file the DSDP will be considered tax residents in Brazil for another 12 months of absence, after which they will also be treated as non-residents5Decree 9.580/2018 (RIR/2018), art. 14, Caption and §3..
Another important element in understanding the "temporary exit" rule was a Normative Opinion according to which "a trip for vacations or other reasons does not characterize a return, as it does not have the stable character of a stay in national territory"6Cosit Normative Opinion 3/1995.. The aim there was to deal with Brazilians who move to Japan to work temporarily, and need to send remittances to Brazil to support their families. Normative Opinions are important because, although they are not law, they bind the work of tax auditors if they decide to inspect a taxpayer's life.
Finally, based on the same Normative Opinion, the Federal Revenue Service presented a Consultation Solution stating that the arrival of a person in Brazil for a vacation or end-of-year get-together would not interrupt the 12-month period of the temporary departure rule7Consultation Solution Disit/SRRF08 262/2009.. Although it is not binding for inspection work, it is possible to understand that this Solution is an indication of the greater importance of the definitive intent to characterize tax residence in Brazil.
But what conclusion can we draw from this?
As with everything in law, it is possible to defend different reasoning for any set of rules, especially when they are scattered over time and disjointed. We already know that there is no such thing as a "Declaration of Temporary Departure from the Country". Now, what we have applied in practice, with some support from Internal Revenue Service regulations, depends on the specific situation of each individual:
1. For those who left Brazil more than 5 years ago and have not submitted any declarations
For those who left Brazil more than 5 years ago and never formalized their permanent departure of Brazil, nor submitted any other declaration, it is possible to understand that the status non-resident for their Brazilian source income. This is a case that the regulations have provided for, and even the Normative Opinion mentioned above guarantees that this will be maintained. status if there were brief returns to Brazil on vacation trips, or for end-of-year get-togethers.
What matters is formalizing this new status before the IRS, to mitigate the risks of questioning, especially if there is a desire to return to Brazil or increase investments. In this case, we are talking about Retroactive declaration of permanent departure from the countryand not a Declaration of Temporary Departure from the Country.
2. For those who left Brazil less than 5 years ago, without submitting declarations
For those who left Brazil less than five years ago, but simply stopped submitting declarations, without formalizing their definitive departure, it is also possible to understand that the Receita Federal's understanding applies if there have been more than 12 months of absence from Brazilian territory.
The point here is to know how to deal with the first 12 months, especially when there is income from abroad that has not been (and needs to be) declared. In this case, it is necessary to define which date is the most appropriateto find out if it is still possible to use the date on which the person left, without having to apply the temporary departure rule.
If the temporary departure rule applies, the first 12 months of absence will be subject to a Brazilian declaration. The term "Declaration of Temporary Departure from the Country" is not used anyway. It is the same as the Declaration of Final Departure from the Country, but with a different date, the date on which the 12 months of physical absence from Brazil are completed.
3. For those who have recently left Brazil and don't know which rule is most appropriate
For those who are more forward-thinking and want to know which rule is best for them, the situation is similar to that of someone who left Brazil less than five years ago. The difference is that there is still time to prepare the Communication of Final Departure (CSD)and there are unlikely to be any fines for late declarations.
We don't have space here to delve into what makes definite mood the most important criterion for characterizing tax residence in Brazil. But it is possible to conclude that, if we don't have a "Declaration of Temporary Departure from the Country", certainly the positions expressed by the Federal Revenue Service on the temporary departure rule serve as an indication that, under the Brazilian rule, the economic, social and family ties maintained with Brazil matter more than counting the number of days spent in Brazil at any one time.
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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References:
- 1Law 3.470/1958 art. 17, Caption.
- 2Decree-Law 5.844/1943, art. 97, Captionparagraph "b".
- 3Law 9.250/1995Article 5, Caption.
- 4Law 12.249/2010, art. 27.
- 5Decree 9.580/2018 (RIR/2018), art. 14, Caption and §3.
- 6
- 7
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