Individual taxpayers: Law provides for foreign currency regularization of assets and property value adjustments

Measures allow for the regularization of unreported assets and rights, as well as adjustments in real estate property value with reduced income tax rates

With the recent issuance of Law No. 14.973/2024, the payroll tax relief policy for employers in 2024 has been officially regulated. However, it is important to highlight that the law also addresses matters relevant to individuals, such as the Special Regime for the General Regularization of Foreign Exchange and Tax Assets (RERCT-Geral) and monetary adjustments of real estate property value.

RERCT-Geral

The initiative is an updated version of the original RERCT, introduced in 2016, and enables Brazilian residents or those domiciled in the country to regularize legally acquired assets, whether held domestically or abroad, that were either not properly reported to the Federal Revenue Service or were inaccurately reported.

Which assets are subject to regularization?

Under the RERCT-Geral, all resources, assets or rights of any nature, of lawful origin held by residents or domiciled in Brazil until December 31, 2023, can be regularized, as long as they have not been reported or have been misreported.

Key assets that can be rectified include bank deposits, investment fund shares, insurance policies, foreign exchange transactions, company shares, intangible assets like trademarks and patents, as well as properties, vehicles, aircraft, boats, and other movable assets that require registration. 

Conditions and deadline for joining

Applications for the RERCT-Geral must be submitted by December 15, 2024, which is 90 days from the law's publication. To join, in addition to paying the required tax and fine, applicants must file a single regularization report with the Federal Revenue Service. This report must include details of the resources, assets, and rights of lawful origin under their ownership as of December 31, 2023, including with their value in Brazilian reais (BRL).

It is also necessary to disclose any conduct that may constitute offenses against the tax system, such as tax evasion or currency evasion.

Taxpayers are also required to retain documents proving their compliance with the regime for five years. Additionally, the regularized assets and resources must be included in relevant tax filings, such as income tax returns, declarations of assets and capital abroad, or bookkeeping records, as applicable.

Benefits

Among the advantages granted is the elimination of tax liability through the voluntary disclosure of the infraction, as long as it is accompanied by the payment of the taxes due and interest on arrears, or the deposit determined by the administrative authority. Additionally, regularization within the deadline exempts the payment of late penalty fines.

Compliance with the RERCT-Geral also allows for the amnesty of potential crimes, extinguishing the punishability of the conduct, provided the regularization takes place before any late payment fine is charged.

What about those who joined the previous RERCT in 2016?

Individuals who joined the RERCT under Law No. 13,254 of 2016 have the option to amend their original report. If they choose to do so, they will be required to pay the taxes and fines on any additional amounts that were not previously reported.

It will also be necessary to comply with the new deadline established for converting amounts into foreign currency, as outlined in the current legislation.

Adjustments in property value

Another key feature allows Brazilian residents to adjust the market value of real estate properties that has already been reported, with the option to pay a reduced, definitive income tax rate on the difference between the acquisition value and the adjusted market value.

For individuals, the income tax (IRPF) rate will be 4% on the difference, while companies will face a 6% rate for corporate income tax (IRPJ) and 4% for the social contribution on net income (CSLL). This update will enable the new property values to be reflected in the 2024 tax returns.

For properties sold within 15 years of the adjustment, a specific calculation will be applied to determine the capital gain, factoring in a percentage of the difference previously taxed due to the update. These percentages increase progressively based on the length of time the property was held, reaching 100% after 15 years. Check out below:

Support for individuals

DPC has a specialized department focused on assisting individuals, which is always up to date on the best tax regimes to ensure our clients' tax compliance and help them navigate tax challenges with confidence. You can rely on this support: dpc@dpc.com.br.