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FATCA AND CRS COMPLIANCE: BRAZIL’S TREND TOWARDS AUTOMATIC EXCHANGE OF INFORMATION



Author(s)

José Rubens Scharlack

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DOI:10.17265/1548-6605/2015.08.003

Although legislation allowing tax authorities to have access to banking information of taxpayers be in force for several years and Brazil be entering into agreements providing for even automatic exchange of taxpayers’ banking information, the extent of Brazil’s constitutional protection of banking secrecy is not yet clear and, accordingly, so is reliability of Brazil’s FATCA and CRS compliance. Under Brazil’s OECD-oriented Double Tax Treaties, banking secrecy is not regarded as broken because of Contracting States sharing taxpayers’ confidential information, which must be kept secret. Also, under FATCA’s Intergovernmental Agreement, account holders who do not comply with its due diligence standards shall be subject to account termination or to the 30% American withholding taxation. Finally, in order to reach full CRS compliance, Brazil must have rules providing for proper financial institutions’ reporting levels. Such rules exist and can be found in Complementary Law 105/2001, but a higher command, set forth in the Federal Constitution, might oppose a formidable barrier to the intended automatic exchange of banking information. So far, the Supreme Federal Court (STF) considers banking secrecy as included in the constitutional protection of intimacy, private life and data secrecy. However, STF has been slowly building new, divergent arguments on this matter, exploring the differences between “secrets of being” (a person’s thoughts, ideas and emotions) versus “secrets of having” (a person’s assets, income and economic activities) and also between the transfer of confidential information from one authority to another versus the leak of such information to the public. A close analysis of the respective precedents shows that banking data secrecy’s judicial protection may come to an end soon. Only if STF concludes such shift of understanding and aligns with OECD’s position on the matter, will Brazil’s road towards international tax enforcement be safely open.