Brazilian Bankers Association on FATCA Proposed Rules

All I need to say is compliance with FATCA is basically impossible under Brazil’s constitution according to the Brazilian Bankers Association. The proposed solution is again intergovernment agreement but I wonder how that will play in Brazil’s fairly nationalistic politics.

 

http://bsmlegal.com/PDFs/Federation%20of%20Brazilian%20Banks.pdf

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17 thoughts on “Brazilian Bankers Association on FATCA Proposed Rules

  1. Fair play to Senhor Portugal – if the US wants FATCA they should pay for it!

    A somewhat unattractive measure considering most of the data will result in little or no tax revenue for the IRS.

  2. @John, @Tim: My guess, and it is only a guess, is that Brazil is not going to be eager to knuckle down and accept US FATCA policy in this regard. Brazil is one of two countries in South America that requres visas for US citizen visitors strictly as a reprisal for the US requiring visas from their citizens. And the fees both Brazil and Chile charge US citizens for visas are kept identical to what the US charges for issuing visas to their citizens.

    Also, when after 9/11 the US started fingerpringing citizens arriving from certain other countries, Brazil was quick to adopt the policy of fingerprinting all US citizens ariving in Brazil. They did nothing to check these fingerprints and quickly disposed of them, but did it to make a point. Permanent US residents in Brazil and airline crew personnel were exempt, but that was all. And when the US stopped doing this, Brazil stopped as well.

  3. @Roger

    After skimming through the other comment letters published at the link below, Brazil’s banks are taking the most hardline position I have seen so far(Canada and Australia haven’t responded yet). It is also apparent that many countries unlike Brazil especially those in Asia have not really thought through the consequences yet of FATCA. Brazil though is a very big country though to have outside the FATCA net so to speak.

    http://bsmlegal.com/fatca-comments.asp

  4. I always thought the UK should start charging US passport holders about £10 at Heathrow to offset the $14 ESTA fee imposed by the US to make the point and have signs explaining to the Americans why they are paying this charge.

    And then hit the Ameicans for €10 if they leave the UK wanting to visit the Schengen Area on the continent.

  5. @Tim, Brazilian Banker’s Association reaction to FATCA does not surprise me at all. As a nation, Brazil is very sensitivie to attempts by other countries to violate its national sovereignty.

    When I lived in Brazil in the 1970s there were very strict controls on foreign currency. Visitors could echange dollars for Brazilian currenty but only if they had official receipts were they able to exchange back into dollars, or any other foreign currency, any surplus Brazilian currency they had left over when they headed back home. And such exchanges were limited to a mazimum of 1/3 of the amount coverted into Brazilian currency. Tourists could use foreign currency to pay hotel bills, but other than that they were requred by law to exchange it at banks who issued official receipts. This was before the day when credit cards were common.
    And when credit cards began to be used, those issued in Brazil were plainly marked “Valid only in Brazil.” You could not use them ouside of Brazil.

    When the Tax Reform Act of 1976 was enacted and US citizens were required to pay taxes, in US dollars, on income earned in Brazil, the Central Bank denied applications for converting Cruzeros to Dollars for this purpose. Brazil did not recognize that the US or any other country had any authority to levy or collect taxes in Brazil. At that time, due to the Petroleum Crisis, Brazil had a tremendous shortage of hard currency with which to pay for petroleum imports necessary to keep the country running.

    US law requres that US taxes be paid in US dollars. I became aware by word of mouth that unofficially the US Consulate in Sao Paulo, where there was at that time co-located an IRS office, was allowing US citizens to exchange their Brazilian currency for US dollars which had been transferred to Brazil for the purpose of paying the costs of our diplomatic missions there, so they could pay their US taxes, It was strictly unofficial. When the Brazilian government became aware of it, it quickly made a protest to the US Ambassador in Brasilia who, in response, issued the order that the Sao Paulo conulate discontine this unofficial currency exchange immediatey. And it stopped. There was never any public announcement either about being able to exchange Cruzeiros for dollars to pay US taxes, or when the practice was suddently stopped. But I do have in my old files correspondence with the Treasury Department from back then acknowledging all of this.

    Americans in Brazil back then were strictly “on their own” in obtaining dollars to pay their US tax obligation. There was a black market in dollars, but purchasing dollars on the black market was illegal and punishable by drastic penalties. And remitting dollars outside of Brazil to the IRS was a violation of Brazil’s money-laundering laws. You could lose everything you owned and go to prison for many years. Brazil now has an abundance of dollars so these currency control laws have been repealed..

    This, by the way, is exactly the situation for US citizens in Venezuela today.;

    So you if you were living in Brazil at that time and were a US citizen, you pretty much had to decide which prison system you would be most likely to survive – the US if you failed to pay your US tax, or Brazil if you obtained dollars on the black market to pay your US tax obligation. I came home.

    US tax law does allow you to defer payment of US taxes if your income is in a foreign currency and you are not able to covert it into dollars for exchange controil reasons. However, that law is totally unworkable becuase the tax payment can only be deferred if you do not use any of that income for personal expenditrues, like food, clothing, rent, etc. If you use it for personal expenditures it is considered “unblocked” and the US tax immediately is due and payable in dollars.

    I had correspondence with the Taxpayer Advocate on the unworkability of this deferral provision. The bottom line was that the Taxpayer Advocate agreed that it was unworkable. But every year it is still printed in IRS Pub 514, Instruction for US Citzens Resident Abroad.

  6. The Australian Bankers Association is apparently not going to send a comment letter. Instead they are going to present on May 15th also. One interesting tidbit they seem to be implying that most US Persons in Australia will go “recalcitrant” and Australian banks under Australian law will be unable to close them out. Thus the Australian Bankers Association wants be detailed info on how to withhold US source income on these people. (In theory they are supposed to kick recalcitrant by 2016 although I don’t see this happening at the moment. Brazil is definitely saying they are going to have do recalcitrant witholding.

  7. @John That would be silly, and self-defeating. The ESTA fee hurt’s the US more than it helps. Charging people you want to come in like tourists is a dumb way to look attractive to visitors. Whoever thought up the tourism fee idea should be fired. Europe so far has been smart, you want to be as friendly as possible to tourists it’s not about retaliation. I think the ESTA should be free reciprocally to those VWP nations, and only retaliate against those who charged first (i.e. Australia and their ETA visa, which should bar them from VWP in the first place.)

  8. @john and all, the current requirement that Brazilians must have visas in order to enter the US is a significant drag on Brazian toursist coming to the US. Brazil is now the #1 source of foreign tourists visiting the US. The press in Miami reports that I think it is 31% of the real estate transactions here are Braziians purchasing vacation homes in Miami. And they all pay cash. No mortgages. The US is opening I believe it is 2 or 3 additional Counsulates in Brazil to make it easier from them to obtain visas. Brazil is a very large country and currently they must be personally interviewed by a consular officer in order to obtain a visa. Brazil is geographically larger than the lower 48 states of the US which means that some have to travel over 1000 miles (1600 km.) in order to visit a US consulate. There has been some discussion about removing the visa requirement for Brazilians because of the way which it limits Brazilian tourists from coming to the US, but that has not happened yet.

    A few years back when Argentina was doing very well economically the US suspended the visa requirement for Argentines, but it was reinstated again when their economy went down hill and many came as tourists but never went back home.

    Today the flow of Brazilians returing to Brazil from the US significantly exceeds the number of Brazilians immigrating to the US. And Brazilian companies have been recruiting qualified Americans, both new graduates and persons with experience, to relocate to Brazil to fill job opening there. Most that go have no idea the tax mess they have let themselves into unless they renounce their US citizenship and become Brazilians, which they can do after 3 years of residence.

    If I was younger, I would be sorely tempted to go back there again. Brazil today is a real land of opportunity. Like the US, it is a melting pot of immigrants from all over the world where everyone is made to feel welome. When we lived there the president was a first generation Brazilin born to German immigrant parents.. One of his cabinet members was the son of Swedish immigrants and another the son of Japanese immigrants.

  9. The ESTA is arrogant and the US claim that it is part of its “Visa Waiver” programme is frankly insulting. The questions asked on the site are more extensive than I have ever filled out for any visa application (even featuring questions such as “Are you a Nazi-era war criminal?”, “Do you use drugs?”, “Have you ever been involved in a terrorist attack?”). Who on earth would answer yes to any of these sorts of questions?

    Anyway, I don’t favour “reciprocity” from the EU’s part since that will just cut into our tourism proceeds here. Why should we scare away US citizens who want to come here on holiday just because their government enacts stupid legislation like this? If anything we should be thanking the US for their misguided ESTA programme because it is likely resulting in more people choosing to either come to the EU for their next holiday or encouraging EU citizens to visit another EU country or foreign destination over the US.

    With the increasing paranoia in the US I wouldn’t be surprised if they just start requiring visas for everyone in 10 years’ time or increase the “Visa Waiver” fees up threefold. All that the US will succeed in doing is make it more difficult for its own citizens to visit other countries…but maybe that is secretely their plan so as to encourage ‘hard earned American dollars’ to be spent ‘in the homeland’ 😛

  10. The USA is planning to open two new consulates in Brazil in order to facilitate tourist visas to Brazilians who are now spending a lot of money there, mainly in DIsney World and NYC. As Roger said, Brazil has always reciprocated what the Americans required of Brazilians and at one time an American Airline Pilot showed the finger when he was being fingerprinted in Rio and he went to jail. I remember well what Roger said about the problems paying US Income Tax from Brazil. I used to ask my brother who lived in Sao Paulo to go to the US Consulate with a certified check in Brazilian money. The consulated accepted it and then sent a check in dollars to the IRS with a copy to me. About FATCA I am curious. Every Brazilian I talk with is not concerned about this because they are sure that Brazil will not cater to the US demand, I have my doubts. Time will tell. As you all knoe I always loved the USA and was always defending the USA here in Brazil. When Obama was elected I thought that he was going to chage the negative image that the USA had all over the world. Now I am a little perplexed with what is going on. I must confess that in my thirty years working in the USA I never had one experience of the US being unfair to me. Now I am startled and in my mind what is happening with Americans Abroad is making me question my beliefs and love for the USA.

  11. @markpinetree, you have a lot of company here, questioning the same. Thank you for sharing your experiences – it is good to hear from you and Roger and others who have perspectives from outside N.America, or Canada.

  12. I tend to agree with Roger on sensitivity. This has a good and bad side. The good side is that they don’t like other countries meddling. It takes an act of God for a Brazilian to be deported to another country. The bad side is that if you weren’t born here, you can never be 100% Brazilian. Ok.. maybe if speak Portuguese with ZERO accent. Another bad side is that if a foreigner slips up, or irritates the wrong people, then it is front page news. So yes, sensitive is a good word for it.

    Even now, if a foreigner comes to Brazil and commits even a small crime, they will be deported. If a foreigner with dependents committs a crime, it is very difficult that the person would be deported. The feeling I get is that the Braz. Constitution does everything to protect Brazilians (natural borne even more so). If a foreign law goes against this, then usually the foreign law is disregarded.

    I bet the Brazilian bankers will fight it. So it depends on how much the US wants this to be passed, or whether they want to use some MAJOR incentives to the Brazilian government. Tit for tat.

    @Mark – actually yesterday I saw in the Folha de São Paulo that now there are 2 (TWO) required visits to get a tourist visa to the US. Before it was only 1 visit. How is that making things easier!!?? If anything, it just adds to the cost for a Brazilian to get a visa. The only upside is that they will open more “servicing locations.” But at the end of the day, for us to go to Rio or Belo Horizonte is almost the same in terms of time and cost. This US “shoot yourself in the foot” “making things easier” just made it more expensive to even go to the US.

  13. @geeez, it used to be much easier for Brazilians to get a tourist visa to visit the US. You used to be able to pay a small fee to the travel agency issuing the ticket who had a “despachante” who daily took Brazilian passports and visa applications to the US consulate and then returned to pick them up the next day.
    But the Patriot Act, after 9/11, changed all of that. Now the person applying for the US tourist or business visa must personallly appear at the consulate so the consular official look at the perons, eyeball to eyball, before granting the visa. And apparently now they must return personally to pick it up after it has been approved, to pick up his passport.

    Brazilian consiulates in the US will allow 3rd parties to bring in passports with visa applictions one day and then pick them up the next day. There is an extra charge by the consulate if a 3rd party is involved, but no personal interview is required. Being a family member I could obtain the visa for my wife without being subject to the extra fee. Payment has to be made in cash with the exact amount. No change will be returned if the person does not have the right chane. There is an ATM outside of the Consular office in Miami where cash can be withdrawn with a credit card.

    Does Brazil require visas of Canadian citizens?

    In one respect the US has loosened its requirements. a Spanish Embassy official in Lima, Peru told me several years ago that he refused to apply for a US visa because he had to certify on the application that he was not a homosexual, which he was. And he therefore refused to apply for a US visa. That was 45 years ago before Spain was one of the nations on the US Visa Waver list, when Generalissimo Francisco Franco was still running things in Spain.

  14. @geeez, with regard to Brazilian extradition of foreigners, do you remember Ronald Biggs? He was one of the participants in the Great Train Robbery in the UK back in the 1960s when the loot was some 2.6 pounds sterling.
    He was captured, tried, convicted and sent to prison, but he escaped and some time later was found to be living in Rio de Janeiro. There was no extradition treaty between Brazil and the UK. Efforts were made to extradite him, but he was able to drag it out until his Brazilian girlfriend gave birth to his son. Having a Brazilian family member, he was not “extraditable,” and lived openly in Rio for several years, helping to raise his son when he was born.We lived in Brazil at that time and this was front page news for weeks.

    Subsequently he was kidnapped by British officials sent there to capture him and they left Brazil, as I reacall by sea, and were not detected or stopped by Brazilian officials. They traveled to Barbados, a former British colony, on the way back to the UK. As I recall, responding to a Brazilian request that he be liberated, the Barbados officials did just that. And I believe he returned to Brazil. This was after we had returned to the US from Brazil, so I am a little foggy on these latter details. The British officials returned to the UK empty handed.

    Brazil carefully checks out foreign applicants for Brazilian citizenship. When we lived there a US citizen, wanted for bank robbery, applied for Brazilian citizenship after living there for several years. This resulted in his extradition to the US, who had no idea what had become of him until receiving this requrest. He was tried, found guilty and sentenced to prison in the US.

  15. Roger, about Biggs, I was reading about that case a few months ago. As I recall, he had relations with a stripper that resulted in a little boy (they thought). The mother took off, and Biggs raised the little boy that wasn’t even his. From the Brazilian Constitions’s perspective, had Biggs gone to jail in the UK, the little boy would starve. Even now, if a Brazilian goes to jail, the government has to pay the family. I think this is the reason why Brazil doesn’t like to incarcerate people, and deportable foreigners are deported quickly.

    If you ask me, Biggs made a foolish decision because he could never travel back to the UK, and he didn’t have such a great life in Rio Janeiro. From my understanding, he just made money through donations from tourists wanting to visit him.

    But back to the issue, paying US taxes instead of paying taxes to a country of residence is in direct conflict with Brazilian law. IMO, it’s reckless and it can put US Citizens in precarious positions with law enforcement wherever they may actually live. After all, it says very clearly in US Passports that “The US cannot help if they have problems with local law enforcement.” I don’t see any exceptions in there for things like tax reasons.

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