The information exchange agreement entered into by the Brazilian and U.S. governments in September 2014 (Foreign Account Tax Compliance Act – FATCA entered into by Brazil and U.S.) started to produce its effects in Brazil according to Brazilian Decree no. 8.506/2015 issued by Brazilian authorities (“Agreement”).
The Agreement provides for mutual assistance in tax matters on an effective infrastructure for automatic information exchange. The Brazilian Internal Revenue and the U.S. Internal Revenue Service will exchange information regarding assets held by Americans in Brazilian financial institutions and assets held by Brazilians in US financial institutions. Pursuant to the new rules only assets exceeding US$ 50,000.00, which were invested on or after June 30, 2014, are subject to the information exchange between the respective governments.
Financial institutions must provide information to their respective governments or else face a 30% income tax withholding penalty for any income produced by an American or Brazilian source, respectively.
It is important to evaluate the structures of all assets held by Brazilians in the U.S. and of those by U.S. Citizens in Brazil, because of the Agreement, and, if necessary, to take immediate action to ensure the assets comply with the new requirements.