BRAZIL Law and Practice Contributed by: Paulo Honório de Castro Júnior and Bruno Marques Feitosa, William Freire - Advogados Associados
Although visits are generally preceded by formal notice of audit commencement, unannounced inspec - tions may occur where justified by risk indicators or suspected irregularities. Access to Financial Information The RFB may obtain bank and financial data directly from financial institutions without a prior court order, pursuant to Complementary Law No 105/2001, as upheld by the STF. This power is widely used in fraud investigations. Search and Seizure (Perquisitions Fiscale) Tax authorities themselves do not have autonomous criminal search powers. Forced entry, seizure of assets or criminal raids require judicial authorisation and are typically conducted in co-ordination with the Public Prosecutor’s Office and the federal police in cases involving suspected tax crimes. Exchange of Information Brazil participates in automatic exchange of financial information under the CRS, enabling cross-border investigations of concealed assets and income. Over - all, the Brazilian system combines extensive adminis - trative audit powers with judicial oversight for coercive or criminal investigative measures. Penalties related to cross-border transactions are governed by a combination of tax, customs, foreign exchange and criminal legislation. At the tax level, the CTN establishes general princi - ples on tax liability, infractions and sanctions. Specific penalties are provided in federal statutes regulating income tax, transfer pricing, CFC rules, withholding obligations and reporting duties. Customs violations are governed by customs leg - islation and the Customs Regulation, while foreign exchange infractions fall under Central Bank regula - tions. In cases involving fraud, concealment or inten - tional evasion, criminal sanctions may apply under 6. Penalties and Sanctions 6.1 Tax Penalties
Law No 8,137/1990 (crimes against the tax system) and related statutes. Administrative Penalties The most common sanctions in cross-border matters include: • fines for underpayment of tax (generally 75% of the unpaid amount); • aggravated fines (typically 100%) in cases of fraud, simulation or wilful misconduct; • isolated fines for non-compliance with ancillary obligations (eg, transfer pricing documentation, CbCR, foreign asset reporting); • disallowance of deductions (eg, interest or royalties paid abroad); and • customs penalties, including fines and forfeiture of goods. Interest (Special System for Settlement and Custody; Sistema Especial de Liquidação e de Custó- dia (SELIC) rate) accrues on unpaid amounts. Criminal Liability Where cross-border structures involve intentional tax evasion, misrepresentation or sham transactions, criminal prosecution may be initiated. Criminal liability generally depends on definitive tax assessment. Competent Authorities These are as follows: • the RFB is responsible for assessing and imposing federal tax penalties; • the Administrative Council of Tax Appeals ( Con- selho Administrativo de Recursos Fiscais – CARF) reviews federal tax disputes; • the Central Bank supervises foreign exchange compliance; • customs authorities oversee import/export infrac - tions; and • the Public Prosecutor’s Office and criminal courts handle tax crimes. Enforcement may involve administrative collection procedures and, ultimately, judicial tax execution pro - ceedings.
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