Tax Information Exchange Agreements (TIEAs)

Tax Information Exchange Agreements (TIEAs) provide for the exchange of information on tax matters and Brazil has concluded TIEAs with 8 countries, including Bermuda, Guernsey, Jamaica, Jersey, San Marino, Switzerland, the United Kingdom and the United States of America.

Exchange of Cross-Border Tax Rulings

Brazil has agreed to exchange tax rulings with eligible jurisdictions from 1 April 2016 in implementation of BEPS Action 5. A specific ruling can be exchanged with a relevant jurisdiction if it is international in nature and affects the relevant jurisdiction. The exchange is possible if there is an agreement between Brazil and the relevant jurisdiction providing for the spontaneous exchange of tax information. The agreement can be a tax information exchange agreement (TIEA), a tax treaty or the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Exchange is also required for “historical” rulings granted between:

1 January 2014 and 31 March 2016; and
1 January 2010 and 31 December 2014, provided they were still in effect as at 1 January 2014.

Financial Account Information Reporting and Exchange

Brazil acceded to the OECD Mutual Assistance Convention as amended and the convention entered into force for Brazil on 1 October 2016. Effective September 2018, Brazil has signed the Common Reporting Standard (CRS) Multilateral Competent Authority Agreement and adopted measures to implement the automatic exchange of financial account information in accordance with the global standard for exchange of information developed by the OECD under the CRS.

Further, Brazil concluded an Intergovernmental Agreement (IGA) with the United States on 30 June 2014 to improve international tax compliance and to implement the U.S. Financial Account Tax Compliance Act (FATCA).

Exit Tax Rules

There is no exit tax in Brazil (see Sec. 8.3).

Subject-to-Tax Rule on Payments of Royalties

Payments of royalties, as well as for technical, scientific, administrative or similar kinds of assistance, to related parties will not be deductible when they may result in double non-taxation due to any of the following reasons:

The same amount is treated as a deductible expense for another related party;
The value deducted in Brazil is not treated as taxable income of the beneficiary according to the legislation of their jurisdiction; or
The values are destined to finance, directly or indirectly, deductible expenses of related parties that entail the situations referred above.

Low or No Tax Jurisdictions and Tax Regimes

Payments of any kind made, directly or indirectly, to persons (individuals or legal entities) resident in low-tax jurisdictions or subject to preferential tax regimes are not deductible for IRPJ/CSLL purposes, unless the following conditions are fulfilled:

Identification of the effective beneficiary of the payment overseas;
Proof of the operational capacity of the non-resident individual or legal entity performing the transaction; and
Proof of payment of the respective price and of the receipt of the goods or services, or use of the right transacted.

The transactions performed with persons (individuals or legal entities) resident in low-tax jurisdictions or subject to preferential tax regimes are subject to a more burdensome tax treatment.

Payments to persons resident in low-tax jurisdictions are subject to a 25% withholding tax, except in the case of dividends (which are exempt) and payments for certain transactions involving the leasing of fixed assets, or interest derived from specific long-term loans, credit notes or commercial papers. In contrast, payments to foreign companies that benefit from preferential tax regimes are not subject to the increased rate of withholding tax and follow the general rules applicable to regular companies.

In addition, transfer pricing rules apply to any transaction performed with a person resident in low-tax jurisdictions (a jurisdiction that does not tax income or that taxes income at a maximum rate lower than 17%) or subject to preferential tax regimes (preferential tax regime is considered to be one that does not tax income or that taxes income at a maximum rate lower than 17%, grants tax advantages to non-residents, or does not tax income earned outside its territory or does so at a maximum rate lower than 17%), even if they are non-related persons. Effective 18 October 2024, any jurisdiction may request an exclusion from the classification as providing favorable taxation or a preferential tax regime, provided they promote national development through significant investments in Brazil. The exclusion is granted exclusively with respect to the condition that a jurisdiction does not tax income or tax income at a maximum rate lower than 17%. Further details on the nature and amount of investment and the period for which the investment is to be made for the purpose of the exclusion can be accessed here.

Brazil adopts a listing approach for the definition of these categories.

The list of low-tax jurisdictions is as follows:

Andorra	Guernsey	Norfolk Island	Switzerland
Anguilla	Hong Kong	Panama	Tonga
Antigua and Barbuda	Isle of Man	Pitcairn Islands	Tristan da Cunha
Aruba	Jersey	Saint Helena	Turks and Caicos Islands
Ascension Island	Labuan	Saint Kitts and Nevis	Tuvalu
Bahamas	Liberia	Saint Lucia	Vanuatu
Bahrain	Liechtenstein	Saint Vincent and the Grenadines	U.S. Virgin Islands
Barbados	Macau	Samoa
British Virgin Islands	Maldives	Norfolk Island
Cayman Islands	Malta	Panama
Cook Islands	Marshall Islands	Pitcairn Islands
Cyprus	Mauritius	San Marino
Dominica	Monaco	Seychelles
Falkland Islands	Montserrat	Singapore
Gibraltar	Nauru	Solomon Islands
Grenada	Niue	Swaziland

Preferential tax regimes include:

With reference to Uruguayan legislation, the regime applicable to legal entities formed as "Sociedades Financeiras de Inversión (Safis)" until December 31, 2010;
With reference to Danish legislation, the regime applicable to legal entities formed as holding companies that do not engage in substantive economic activity;
With reference to the legislation of the Kingdom of the Netherlands, the regime applicable to legal entities formed as holding companies that do not engage in substantive economic activity;
With reference to Icelandic legislation, the regime applicable to legal entities formed as International Trading Companies (ITC);
With reference to U.S. legislation, the regime applicable to state-formed Limited Liability Companies (LLCs) whose participation is composed of non-residents, not subject to federal income tax;
With reference to Spanish legislation, the regime applicable to legal entities formed as Entidades de Tenencia de Valores Extranjeros (E.T.V.Es);
With reference to Maltese legislation, the regime applicable to legal entities formed as International Trading Companies (ITC) and International Holding Companies (IHC);
With reference to Swiss legislation, the regimes applicable to legal entities formed as holding companies, domiciliary companies, auxiliary companies, mixed companies, and administrative companies whose tax treatment results in a combined corporate income tax incidence of less than 20%, according to federal, cantonal, and municipal legislation, as well as the regime applicable to other legal forms of corporate formation, through rulings issued by tax authorities, resulting in a corporate income tax incidence of less than 20%, according to federal, cantonal, and municipal legislation;
With reference to Austrian legislation, the regime applies to legal entities formed as holding companies that do not engage in substantive economic activity;
With reference to Costa Rican legislation, the Free Trade Zone Regime (RZF);
With reference to Portuguese legislation, the regime of the Madeira International Business Center (CINM); and
With reference to Singaporean legislation, the following differentiated tax rate regimes:

for non-resident shipowners, charterers, or air transport enterprises;
for insurance and reinsurance businesses, including exemptions and concessionary rates of tax;
for Finance and Treasury Centres;
for trustee companies;
for income derived from debt securities;
for global trading companies and qualifying companies;
for financial sector incentive companies;
for provision of processing services for financial institutions;
for shipping investment managers;
for trust income to which a beneficiary is entitled;
for leasing of aircraft and aircraft engines;
for aircraft investment managers;
for container investment enterprises;
for container investment managers;
for approved insurance brokers;
for income derived from managing qualifying registered business trusts or companies;
for ship broking and forward freight agreement trading;
for shipping-related support services;
for income derived from managing approved venture companies; and
for international growth companies.

Ultimate Beneficial Ownership Register

Effective 1 January 2023, companies incorporated in Brazil are required to submit information relating to their beneficial owners to the Brazilian tax authorities. For this purpose, a beneficial owner is an individual or a legal entity that has a significant interest in or significant control over a Brazilian company.

A person is deemed to have significant control over a company if one of the following conditions is met:

The person holds, directly or indirectly, more than 25% of the share capital or rights in the company;
The person holds, directly or indirectly, more than 25% of the voting rights of the company;
The person holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company;
The person has the right to exercise or actually exercises, significant influence or control over the company; or
The person has the right to exercise or actually exercises, significant influence or control over the activities of a trust or a firm that is not a legal person but whose trustees or members satisfy any of the above 4 conditions in relation to the company.

Companies are required to submit the beneficial ownership information to the tax authorities within 30 days of incorporation. Changes in the beneficial ownership information must be notified to the tax authorities by the last day of the month following the occurrence of change.

Indirect Transfer of Assets

Brazil currently does not have legislation to impose taxes in cases of offshore indirect transfers (see Sec. 5.5.5.).

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