To emigrate to another country is something complex and isn’t helpful the absence of information about all procedures that are needed before and after leaving. An important aspect is to maintain or change the taxpayer’s fiscal domicile.
After leaving the country, there are cases that aren’t convenient to notify the Brazilian Tax Administration about your departure.
By the time of the Income Tax Return filing in Brazil, often the emigrant is taken by surprise while researching the subject on-line to discover they have missed the deadlines to present the so called Communication of Definitive Departure (CDD) and the Declaration of Definitive Departure (DDD).
• Declaration of Definitive Departure:
It’s curious how blogs about this theme, as well as the official website of the Federal Department of Revenue (FDR) focus on 2 basic ideas: a) that the DDD is mandatory to every emigrant; b) there will be a fine beyond the deadline. But the matter far is more complex and these rules are not applicable to every emigrant, in any given situation.
To declare and to communicate are different things when it comes to the FDR’s bureaucracy.
The CDD expires in February of each year and informs the FDR regarding the travel, representative, income sources, dependents, last Income Tax Return, etc. Almost all information that is required in the annual Income Tax Return form. The DDD (of which the CDD is merely an ancillary formality) uses the same Income Tax Return form, with the same deadline (April of each year). They gave just a different name to it.
The taxpayer who has just emigrated probably has a lot to deal with in his new life abroad, but is also expected to fill 2 forms in 2 different moments with, basically, the same information to be submitted to FDR’s analysis.
But if a Brazilian emigrant has missed those deadlines, there may be a solution to the problem that doesn’t mean the payment of imposed fines. A careful study is needed on a case-by-case basis, before deciding to suppress the Brazilian tax domicile, and suffer the consequences related to it in the future.
The FDR set the rules before the massive Brazilian emigration phenomenon that began in 2014.
Emigrants moving abroad to either accompany their foreign spouses returning to their country of origin or to settle in one that has what lacked in Brazil, has also to meet deadlines and comply with redundant formalities established by the FDR.
There’s also another category of expat, a minority that moves temporarily to study or to work in the company’s foreign affairs. They travel after careful planning with the return date already set. For them, complying with the requests created by the FDR is less difficult, although the crisis has increased the number of people who doesn’t return because they found a good job opportunity before it.
The rules could be simpler with ease access to avoid the situation of an emigrant who pays fines in order to seek the regular status that wasn’t irregular in the first place.
The definition of non-resident taxpayer, for example, not every expat in the middle of the process of settling abroad is able to define until the end of February if the condition is considered permanent or temporary, under FDR’s definitions on the matter.
And also, there are those who travel a lot for a living and even though they may exceed 183 days abroad, they do not intend to eliminate their Brazilian tax residency, nor is willing to emigrate somewhere else. But taking into consideration only what is written in the FDR’s rules, they should have to be considered a non-resident taxpayer, therefore paying higher taxes, without exemptions or compensations.
When the DDD is not suitable:
It would be useful if FDR’s official website had clear mention that anyone can keep the Brazilian tax residency while actually residing in another country, with no time limits, in addition to the compensations agreements signed with many other countries to avoid full double taxation and finally, information about the tax system for the non-resident taxpayer. All those aspects could be on the CDD and DDD page that is limited to definitions, fines and deadlines.
Of the countries that receive the most Brazilian emigrants, only the USA doesn’t have a signed compensation agreement. In that case the income received in one country will be fully taxed in both. But regarding Portugal, Italy, Germany, Spain, France and some others that have been welcoming many Brazilians, there are agreements to allow the reduction of income tax already paid in the other country.
If it’s the case of emigration to one of those countries, the attention must be redoubled in order to find out how interesting is the cancellation of the Brazilian tax domicile with the presentation of CDD or DDD. If they have already been submitted, there are ways to remedy this situation.
Immediately after submitting the DDD form, if there is an income tax refund to be received in the future, the disclosure of all Brazilian banking accounts cannot be done. By becoming a non-resident taxpayer, there’s an increase of restrictions on the operations and tougher surveillance from public authorities over that checking account.
Whoever has financial investments in Brazil already knows that they probably would not have the same level of profit if they were invested elsewhere abroad. By declaring themselves non-resident taxpayers to the FDR they are equated to foreigners, paying higher taxes with no right to benefit from the existing exemptions and deductions to residing nationals.
If there’s a rented property in Brazil involved, the real estate agency needs to monthly retain the income tax and what if left from the rent amount will be deposited in that restricted bank account mentioned above or an international transfer to your foreign bank account will have to be made. If you are lucky enough to find an agency that does this kind of banking operation, imagine if a mistake is made concerning the IBAN code ending your money in someone else’s account.
Thanks to the technology, today the annual Income Tax Return, the exemption’s declaration and the payment of taxes can be easily done on the Internet, or using a mobile phone’s app, leading to the opportunity for emigrations to keep their Brazilian tax domiciles because the local tax legislation does not prohibit taxpayers from having simultaneous tax domiciles worldwide.
It is wise to reflect and be well aware of all the consequences regarding the condition of non-resident taxpayer before presenting the CDD or DDD to the FDR fearing any wrongdoing. It may not be the case of doing it.
In any case, before paying fines for complying a set of formalities beyond stipulated deadlines, we offer meticulous and personalised guidance to help you decide about your Brazilian tax domicile, either to maintain or cancel it, but avoiding unnecessary fines.
Leonardo da Veiga Cabral
Italian-brazilian lawyer with over 20 years’ of professional experience.
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