Legal ins and outs of the Pandora Papers leaks affecting high-ranking Brazilian officials

This week, media outlets around the world pored over the revelations of the Pandora Papers — a vast leak of documents exposing the secret wealth and business dealings of world leaders, political figures, and celebrities. In Brazil, the focus was on Economy Minister Paulo Guedes and Central Bank chairman Roberto Campos Neto — both of whom were revealed to have offshore accounts in the British Virgin Islands.

Mr. Guedes has been summoned by a number of committees in Brazil’s lower house to explain revelations that he owns an offshore firm worth USD 9.5 million when he took over as Economy Minister. Mr. Campos Neto, in turn, owns four companies in tax havens, one of which was closed in 2020.

But, as the two men stressed, owning offshore companies is not illegal in Brazil, provided the revenue authorities are informed of their existence.

Barring exceptions, every Brazilian tax resident — including foreigners with permanent residence and temporary work visas — must file an income tax return every year, detailing their earnings, assets, and equity in companies. The only individuals exempt from this requirement are those who earned less than BRL 28,559.70 (USD 5,184.94) of taxable income in the previous tax year, and did not earn capital gains from the sales of assets or rights or from operations on financial markets.

In short, a tax return involves detailing all of an individual’s assets, though there...