Relevant Changes in the Criminal Definition of Tax Evasion

On September 1^, 2020, the National Monetary Council (CMN) published resolutions Nos. 4,841/2020 and 4,844/2020, which significantly updated the amounts to be observed for legal authorization and declaration to the Brazilian Central Bank (BACEN) and generated a direct impact on the grounds to establish tax evasion crimes.

CMN Resolution No. 4,841/2020 increased the amount which individuals and legal entities are obliged to report annually to the Brazilian Funds Located Overseas (CBE), from US$ 100,000.00 (one hundred thousand dollars) to US$ 1,000,000.00 (one million dollars), or the equivalent in other currencies.

In turn, CMN Resolution No. 4,844/2020 increased the amount from which it is mandatory to inform the Brazilian Central Bank about transactions in deposit accounts held in banks authorized to operate in the exchange market, for individuals and legal entities that are resident, domiciled or headquartered abroad. The limit of R$ 10,000.00 (ten thousand reais) was increased to R$ 100,000.00 (one hundred thousand reais), although the Brazilian Central Bank may request, in specific situations, information about transactions of values lower than the new limitation.

These legal modifications have immediate effect for criminal definition purposes, as they alter the guidelines for tax evasion crimes, provided for in article 22, sole paragraph of the Federal Law No. 7,492/86: which are (i) to perform unauthorized exchange operations with the purpose of promoting tax evasion (caption); (ii) unauthorized evasion of currency or foreign remittance of funds (sole paragraph, 1^st part); and (iii) to keep bank deposits abroad that have not been declared to the competent authority (sole paragraph, 2^nd part).

Thus, due to the new terms established by the National Monetary Council, police investigations of undeclared amounts lower than R$ 100,000.00 (one hundred thousand reais), or US$ 1,000,000,00 (one million dollars), in case of financial transactions and bank deposits made abroad, must be dismissed, considering the understanding that the most beneficial law to the defendant must be applied.

With regard to ongoing criminal lawsuits, there will also be the obligation to dismiss any trial, due to absence of elements to define the crime of tax evasion.

Also, concerning past convictions, considering the contents of the new resolutions which acknowledge that the Brazilian exchange rate policy is not affected by transactions lower than R$ 100,000.00 (one hundred thousand reais), or by maintaining resources in a foreign account up to 1 million dollars, it will be possible to plead a retroactive application of this law to the judiciary system, for criminal cases already prosecuted.

Demarest’s White- Collar Crime team is available for further clarification on the topic.