Brazil adopts universal taxation for individuals and corporations - What to do?

Every time the Brazilian Revenue Service is about to lose a judicial battle, it lobbies for a change in the tax system. And gets it. Brazilian Royal Decree n. 627 from 2013 comes to further prove that saying.

*The actual name is Provisional Measure n. 627, but since it is an executive decree with the status of an act issued by the Parliament, it seems more appropriate to call it a Royal Decree, don't you think?

The aforementioned rule basically lists all the major lawsuits that the Revenue Service was losing, or about to lose, in the Superior Courts. And then gives a new, usually harsher, legal treatment to all the matters in dispute. (If only I could do that when discussing an Agreement)

Major topics are the valuation of Goodwill and complementary rules for the valuation of investments.

In my opinion, though, the greatest change has been the institution of universal taxation for individual. Or, in other words, a de facto prohibition of the use of tax havens by wealthy individuals, for tax planning.

So far, and keep in mind I'm talking about individuals only, not companies,  Brazil would only tax gains obtained abroad in two situations: first, when the values were made available directly to the individual, such as a deposit in his bank account and two, when the state of the deceased individual would have access to the gains, bringing them to Brazil.

A few years ago, Brazil had instituted universal taxation for companies that owned investments, or other companies, abroad. But the law didn't mention individuals. Thus, many companies were assigning foreign subsidiaries to this directors or shareholders, and them making use of them for tax planning purposes.

This "loophole" is now closed. Or is it?

The new rules are Byzantine, and not completely smart. I would say, for example, that the use of trusts or the use of several layers of companies would suffice to dodge them.

It seems that the main goal of the federal government was to coerce huge Brazilian companies (namely, Vale, Embraer and a few others) to retreat in their strategies to shift profits abroad.

In doing so, it has created a huge setback for Brazilians who invest in foreign retirement plans, foreign pensions or who want to manage real estate in Miami (since this kind of investment is usually made through companies).

I will discuss this Royal Decree further in future posts.