EN 
BR When I wrote our text on temporary exitIn this article, I discussed some situations in which a person stops living in Brazil and simply stops filing tax returns. One point I mentioned there was that the Federal Revenue Service (RFB) has an understanding that allows it to recognize that a person is no longer obliged to file income tax returns in Brazil 12 months after departure, and is treated as a non-resident. Even so, for those who live abroad and have not formalized their tax exit, it is advisable to formalize the status non-resident status before the IRS, in order to avoid risks.
When we use the title "I didn't file a Declaration of Definitive Departure from Brazil", it is important to emphasize that this text deals with those who no longer file declarations in Brazil after leaving, and have not formalized anything. If declarations have been submitted after departure, it may be a case of regularizing assets or of dual tax residence.
The aim of this text is to discuss these risks, focusing mainly on the following aspects:
- what it looks like CPF registration status while status tax is not updated;
- what is the burden of proving what happened? in the event of an inspection;
- what is the situation with income earned in Brazil as a non-resident; e
- what about returning to Brazil, if you ever want to return to being a tax resident in Brazil having assets and income built up abroad before returning.
I didn't make a Declaration of Final Departure from Brazil: what happens to my CPF?
One of the most frequently asked questions about Brazil's tax system is about the status of the CPF, especially if it is pending regularization. Only the main details are worth mentioning here.
The final exit declaration and registration with the CPF
The transmission of Declaration of Final Departure from the Country (DSDP) automatically updates a person's CPF registration, making them non-resident from the date of tax exit mentioned in the DSDP.
Therefore, if the DSDP has never been transmitted, then a person's CPF registration status remains out of date. In the absence of further information, therefore, the person will continue to be treated as a tax resident in BrazilAt least for registration and cross-checking purposes. In this case, at least in principle, the RFB could want to charge taxes on income earned abroad after leaving.
"Regular CPF" does not mean that the person has become a non-resident
Information about the status whether a person is a tax resident in Brazil or a non-resident is still a hidden piece of information. This information is linked to the CPF, but so far it is not available for consultation even on the eCAC (RFB's portal for taxpayers to consult their own data). Only with face-to-face assistance from the RFB or it is possible to confirm whether the CPF registration information is correct or not.
I'm often asked if the fact that the CPF registration status informs "Regular CPF" means that the person is listed as still resident, or as non-resident. The "regular CPF" has nothing to do with the status taxpayer's tax. All the RFB wants to say is no grounds for irregularity found in the RFB's cross-checking of data.
When the CPF status is "pending regularization"This means that paying sources have informed the Receita Federal that the taxpayer received income from Brazil as a tax resident in Brazil. It also means that the volume of this income was sufficient for an income tax return to be mandatory, and nothing was filed. In our experience, this happens above all when there have been stock market transactions, or when there have been substantial withdrawals from private pensions, salaries or wages.
For this type of case, especially when amounts are also blocked, it is necessary to transmit the missing declaration or submit documentation to the IRS to prove that the paying sources provided incorrect information to the RFB.
Burden of proof in case of inspection
As Carf (the Administrative Council for Tax Appeals) analyzed in more depth in the Leandro de Aguiar caseThe filing of income tax returns is an element of proof to consider the existence of a definitive intention, i.e. whether a person should still be considered a tax resident in Brazil, even if they live abroad.
This is consistent with the position that, for registration purposes, if the CPF has outdated information, it is up to the taxpayer to prove this fact, since the taxpayer himself had a duty to provide correct and up-to-date information about his situation to the tax authorities. The proof in question may be simple, but the tax authorities should not assume that the taxpayer is correct without some confirmation.
In this way, submitting the DSDP is a benefit, because it updates the CPF registration and is an element of proof. Once the DSDP has been filed, it can be said that the burden of proof is reversed: it becomes the tax authorities' task to prove that the taxpayer made an incorrect or false declaration, and that the taxpayer should therefore continue to be treated as a tax resident in Brazil.
I didn't make a Declaration of Final Departure from Brazil: a practical case answered by the IRS
In 2021, the Federal Revenue Service, through Cosit (General Coordination of Taxation), responded to a Request for Consultation precisely on this topic post1Cosit Consultation Solution 63/2021.. In that case, a woman moved to the United States in 1998, married there and has continued to live there until the present day. From the report, it seems that at no point was the Declaration of Final Departure from the Country (DSDP)or any other declaration was submitted in the following years.
After the divorce, which took place in 2013, this person received a property in Florida, which he intended to sell before moving back to Brazil. In this case, he asked the Receita Federal if he had been obliged to declare the property all these years, if the sale of the property would be taxable in Brazil and if the assets could only be declared in Brazil after returning to the country.
Although the Solution to the Consultation used the regulations in force in 1998, the essence of the guidelines remains the same, and we have already dealt with cases involving clients with a similar life situation.
What happens to income earned abroad
The Answer to the Consultation made it clear that if the Declaration of Final Departure from the Country was not filed on time, and no declaration was filed afterwards, then the person would continue to be treated as a tax resident in Brazil only for the first 12 months of absence from Braziland would then be considered a non-resident ("temporary exit" rule)2Cosit Normative Opinion 3/1995..
If this was the case, then the Consultant would also continue to be obliged to file income tax returns in Brazil only for the first 12-month period of absence. After that, she would no longer need to file returns. This also means that there was no obligation to declare the property acquired in Florida. It also means that any capital gain from the sale of the property before returning to Brazil would not be subject to Brazilian taxation.
How to return to Brazil
The Solution also clarifies that by returning to Brazil permanently, the person reacquires the status of being a tax resident in Brazil, and will be obliged to declare all the assets and income they have from the moment they return. It is not necessary to pay income tax on income received before returning to the status of tax resident in Brazil.
I didn't make a Declaration of Final Departure from Brazil: conclusions
It's really positive when we have a binding Consultation Solution that is favorable to the taxpayer. This provides valuable legal certainty and is applicable to any inspection if and when there are problems. Based on the topic, it is possible to summarize the issue as follows:
1. Your CPF information with the Receita Federal is out of date
Submitting the Declaration of Final Departure from the Country does not cancel the CPF, it only updates it. Until the declaration is submitted, the person will continue to be listed as a tax resident in Brazil, for the purposes of registration and cross-checking data with the Receita Federal.
There is a lot of misinformation about the CPF status of those who go through the tax exit process. It's a simpler issue than it seems.
2. Outdated CPF, but no income tax returns filed in Brazil, still has a solution
If no income tax return was filed in Brazil after the tax exit, the taxpayer has to provide proof of the fact, but even then the IRS accepts corrections. More complicated is for those who live a "double life", acting as a tax resident in Brazil without providing information about their life abroad.
A Consultation Solution does not discuss evidence. It only pronounces on a minimally proven practical situation, and assumes the veracity of the facts discussed. In this way, there was no discussion about the burden of proof, because the proof had been provided. In any case, it has been our experience that proof before the IRS is not complex.
For those who haven't filed a DSDP or subsequent declarations, but whose lives are consistent with their non-resident status, it is advisable to formalize this status by filing a DSDP. This facilitates discussion because, if there is ever a dispute with the tax authorities, the information is correct and up-to-date, and it is assumed that the taxpayer is correct. It's more difficult when the burden of proof is on the taxpayer.
3. It's important to resolve the problem, especially if you intend to return to Brazil
If no income tax return was filed in Brazil after the tax exit, the taxpayer has to provide proof of the fact, but even then the IRS accepts corrections. More complicated is for those who live a "double life", acting as a tax resident in Brazil without providing information about their life abroad.
Resolving the issue beforehand makes it clearer that there was no duty to pay tax on income earned abroad before the return. Thus, formalizing the tax exit facilitates the return, as there is no question of whether there were any declarations that were not filed along the way.
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.
Count me in!
References:
- 1
- 2
Home › Forums › I didn't make a Declaration of Final Departure from Brazil: 3 conclusions about the risks