Declaration of Final Exit in Brazil: what is its relevance for digital nomads who want to have their tax residence abroad?
Many digital nomads are unaware of the Final Exit Declaration and there is a (cultural) reason for this.
Most Brazilians who choose to live abroad think that the only planning they need to do before immigrating is financial planning.
However, this is just one of the things you need to do when thinking about living in another country. Along with financial planning, it is essential to do tax and migration planning, for the simple reason that in order to live "legally" in another country, you need to know the laws of that country, especially the tax laws.
In this sense, it is equally important to know the tax laws of Brazil, because if any tax inconsistencies are pointed out in Brazil, they can be relayed to various countries around the world through the sharing of tax information, given the tax conventions and treaties that Brazil has signed with them.
Unfortunately, the majority of Brazilians who decide to live abroad do not carry out tax planning and, as a result, many end up on the fringes of the tax laws and receive tax assessments, usually to answer for tax evasion or to collect undeclared amounts.
Due to the cultural heritage of not carrying out tax planning before immigrating abroad, many people are unaware of the Definitive Exit Declaration and the importance of submitting it in order to avoid problems with the Brazilian tax authorities.
What is the Final Exit Declaration?
The Final Exit Declaration is a document submitted to the Federal Revenue Service during the income tax return submission period, in which the taxpayer certifies that he is leaving the country and is therefore no longer a tax resident in Brazil.
By submitting the Definitive Exit Declaration, the taxpayer breaks the link with the Brazilian tax authorities and therefore cannot be charged with submitting the annual income tax return.
The requirement to submit the Final Exit Declaration is set out in Normative Instruction 208/2002. In other words, for the Federal Revenue Service, it is not enough just to leave Brazil to be considered a non-tax resident, but also to submit the Definitive Exit Declaration.
The consequences of not submitting the Final Exit Declaration
If you live abroad and haven't filed your Final Exit Declaration, the consequences can be catastrophic.
As far as the Federal Revenue Service is concerned, you are still a tax resident in Brazil, so you are still obliged to file your annual income tax return universally. In other words, you are still obliged to declare all the money you have received, regardless of its origin.
In addition to paying a fine for not submitting the declaration, the Brazilian tax authorities will be able to collect the undeclared amounts retroactively, plus interest and monetary correction.
However, the major negative consequence of not submitting the Final Exit Declaration is the risk of being fined by the Brazilian tax authorities for tax evasion, both in the administrative and criminal spheres.
Currently, with the sharing of tax information between countries through international cooperation agreements, combined with the use of artificial intelligence, the risk of detecting double tax residency and tax evasion is increasing.
Remember that tax evasion is not just a crime in Brazil.
We therefore recommend that you carry out tax planning, regardless of your current situation.
If you are interested in hiring professional legal services related to the possibility of submitting the Final Exit Declaration or carrying out tax planning, we are a law firm specializing in the subject. To do so, please contact us by e-mail: thyanipuppio@gmail.com, or by WhatsApp.
