On September 13, 2016 the Brazilian Federal Revenue Office
(Secretaria da Receita Federal – SRF) issued
Normative Instruction RFB No. 1658 (IN 1658/2016), which amends
Normative Instruction RFB No. 1037, of June 4, 2010 that list the
countries or dependencies with low taxation and privileged fiscal
regime. There are more than 60 jurisdictions in this list.
Favored taxation country or
dependency1 means any country or dependency of
a country that does not impose tax on income or, when imposes, it
is a low-tax country, in which the applicable income tax rate is
equivalent to any percentage varying between zero and 20%
Privileged fiscal regime2 means any
jurisdiction that met one or more of the following requirements:
(i) it does not tax income or where the maximum applicable tax
income rate is below 20%; (ii) it grants fiscal advantages to a
non-resident individual or legal entity: (a) without requiring that
substantial economic activity be made in the country or dependency;
or (b) conditioned to the non-exercise of substantial economic
activity in the country or dependency; (iii) it does not tax the
earnings obtained outside its territory or imposes a maximum
applicable rate below 20% to such earnings; (iv) it does not permit
access to information regarding the capital stock structure,
ownership of assets or rights or to the economic transaction
entered into between the parties.
IN 1658/2016 replaces the Netherlands Antilles by Curacao and
St. Maarten for succession issues, excludes St. Kitts and Nevis by
duplicity with the Federation of Saint Kitts and Nevis and adds
Austria (if the Austrian legal entity is included in the holding
company regime) and Ireland. Therefore, special attention should be
given to Brazilian companies with operations in Austria and
To be included within the privileged tax regime, it is
understood that the legal entity that carries out the activity of
holding company plays substantive economic
activity when it has, in its country of domicile,
operational capacity suitable for its purposes, evidenced, among
other factors, by the existence of a sufficient number of qualified
employees and facilities appropriate to the exercise of effective
decision-making and management related to: (i) the development of
activities in order to obtain income derived from its assets; or
(ii) the administration of equity interests in order to obtain
income arising from the distribution of profit and capital
The term "substantive economic activity" is essential
to distinguish between productive investments that generate
employment and income in the country, and abusive tax planning,
which causes loss of revenues for Brazil. This concept affects
Brazilian companies with Austrian holding companies.
IN 1658/2016 was published in the Official Gazette of the Union
(Diário Oficial da União – DOU) on
September 4, 2016 but will produce legal effects as of October 1,
The major novelty of this measure is the inclusion of Ireland,
which will adversely affect different sectors of the Brazilian
economy that are more internationalized, like information
technology and agribusiness. The Brazilian air industry will be
particularly compromised. This decision increases to
25%3 the rate of tax paid by the airlines about the
value of the leasing of their fleet. According to the Brazilian
Association of Airlines (Associação Brasileira
das Empresas Aéreas - Abear), the inclusion of Ireland
will affect the levying of taxes on half of the fleet of aircraft
of Brazil, rising to BRL 1 billion of taxes on the system, because
approximately to 300 aircraft (55% to 60% of the fleet) are leased
The Brazilian tax authorities are in line with other countries
that have imposed restrictions on tax havens and recently passed
the challenge especially the Irish tax regime.
1. This first definition is contained in article 24 of
Law 9.430, of December 27, 1996, which introduced transfer pricing
regulations in Brazil.
2. This second definition is provided for in article 23
of Law No. 11.727, of June 23, 2008, which approved new wording for
articles 24-A and 24-B of Law 9.430/96. Article 30 of Law
11.941/2009, clarified that it is not necessary to attend
simultaneously and cumulatively all the requirements listed above
and that it is sufficient to attend only one for a country or
dependency to be treated as a privileged fiscal regime.
3. The rate to be paid on the value of the lease of the
aircraft, according to the new rule, would rise from zero (it is
15% but the airlines are exempt) to 15%. Taking into account other
embedded costs, the real impact would be 33%.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In a context in which there will be an automatic exchange of information with other countries, on May 31, the Executive Branch filed a bill of law including a "Tax Amnesty Regime" before the House of Representatives.
Galante & Martins Internacional es la unidad de servicios profesionales de la firma, que ofrece apoyo al desarrollo de los negocios a nivel global, con especial foco en los países de la región de Latinoamerica.
Foi publicada no Diário Oficial do Estado do Rio de Janeiro, em 26 de agosto de 2016, a Lei nº 7.428/2016, regulamentando o Convênio ICMS nº 42/2016 e instituindo o Fundo Estadual de Equilíbrio Fiscal - FEEF...
A raíz de la reciente modificación a la Resolución Miscelánea Fiscal para 2016, se establece, de nueva cuenta, la obligación a los residentes en México que tengan inversiones en ciertos países, de reportar los ingresos y operaciones realizadas...
As a member of the G20, Argentina supports the goals of the OECD's Action Plan and intends to follow the recommendations that result.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).