Tax treaties and aggregation agreements have been retained Article 1 lists several definitions to be used for the proper interpretation of the IGA. Among them, under “dd”, there is the definition of “account holder”. For the purposes of the IGA, “account holder” means the person designated or identified as the holder of the financial account by the financial institution holding the account. Given that the English version of the IGA uses the word “person”, it is clear that the agreement applies to both natural and legal persons. This is also explained by Article 2, which expressly mentions that information relating to legal persons shall also be exchanged between competent authorities. There are 02 (two) forms of information exchange that are made possible by TIEA and other agreements signed by Brazil. They are: the automatic exchange of information (subject to the implementation of appropriate legal and technical structures) and the exchange of information on request. Brazil`s approval of the TIEA was due to the impact of the US Foreign Account Tax Compliance Act (FATCA). Opposition to the TIEA had been strong, including from a senator who once served as head of Brazil`s tax department, saying that the provision of tax information in the United States (as requested by fatca) violated Brazil`s sovereignty and civil rights and that the agreement was unconstitutional. Despite these arguments, the TIEA was finally put to the vote and approved.
After the adoption of FATCA, the sovereign nations of domestic financial institutions felt pressured either to allow them to provide taxpayer information to the U.S. government or to subject them to 30% tax on all payments from U.S. sources. One such sovereign nation is Brazil, which in 2007 signed an Information Exchange Agreement (“TIEA”) with the United States, but did not ratify it, which would at least allow for the exchange of information between governments. It can be said with certainty that the adoption of FATCA accelerated the ratification of the TIEA in Brazil (which took place six years later, in 2013) and the signing of the Intergovernmental Agreement (“IGA”) to implement the provisions of FATCA in the country. We will discuss these two agreements in the following areas. Article 11. For interpretative purposes, international conventions signed by the Government of the Federative Republic of Brazil include conventions and conventions for the avoidance of double taxation. The agreement provides that the United States will have to exchange all the listed information from 2014 on. With regard to Brazil, the IGA specifies: (2) Article 28, paragraph 1: When the competent authorities of the two States Parties agree on this point, they shall deny contractual advantages to a particular person or undertaking if those authorities consider that the granting of contractual advantages constitutes an abuse of the object and object of the treaty.
Contrary to the provisions of point 1, this refusal seems to require prior formal agreement between the States parties. As we have already mentioned, if the Brazilian financial institution does not comply with the agreement, it can be subject to a 30% US agreement, in accordance with FATCA. . . .