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Results: 4 Answers
Corporate Tax
4.
Cross-border treatment
4.1
On what basis are non-resident corporate entities subject to tax in your jurisdiction?
 
Brazil
Generally, non-resident entities are subject to withholding income tax (IRRF) only on income received from Brazilian sources relating to services, rights and capital gains on the sale of Brazilian assets. The applicable rates in the absence of a double tax treaty are:

  • 25% for any payments or credits of income to beneficiaries in tax havens; and
  • in the case of other beneficiaries:
    • 25% for the provision of services;
    • 15% for other sources of income; and
    • progressive rates from 15% to 22.5% for capital gains.

Dividends paid or credited to non-resident entities are not taxed.

Brazilian domestic law does not address the characterisation of permanent establishments of non-residents in Brazil. The taxation of any such establishments in Brazil must be analysed on a case-by-case basis in light of the rules governing entities subject to IRPJ, the taxation of branches, representations, commission merchants and agents of foreign companies, and the provisions of any relevant double tax treaty.

For more information about this answer please contact: Henrique Lopes from Koury Lopes Advogados
4.2
What withholding or excise taxes apply to payments by corporate taxpayers to non-residents?
 
Brazil
Payments to individuals or companies domiciled abroad for services rendered are generally subject to a 25% withholding income tax. Other payments (eg, interest, technical services or royalties) are subject to a 15% rate.

Payments made to beneficiaries that are resident or domiciled in countries which do not tax income or which tax income at a maximum rate of less than 20% are generally subject to a 25% withholding income tax. In certain cases (eg, export financing), the withholding income tax is reduced to zero.

Capital gains are taxed at progressive rates from 15% for gains under R$5 million to 22.5% for gains over R$30 million on the difference between the sales price and cost of acquisition of the asset sold.

Income and capital gains from financial transactions by non-residents are taxed in the same way as financial transactions of residents (individuals), except that foreign institutional investors can only invest in the Brazilian stock markets through a special system (Resolution 2689 of the Central Bank), which exempts capital gains on the sale of stock from tax.

Although they do not qualify as withholding taxes, since they are levied on Brazilian resident companies that remit the resources in question, and not on the non-resident beneficiary, several other taxes apply to this remittance, as follows:

  • a services tax (ISS) levy of up to 5% of the value of the remittance if it is made in consideration for the import of services into Brazil (tax may be grossed up if the remittance is net of taxes);
  • a PIS/COFINS – Imports levy of 9.25% on the gross amount of the remittance, including the value of the tax itself and that of the ISS, in the case of import of services; and
  • contribution on intervention in the Brazilian economic domain (CIDE) at a rate of 10% in the case of royalties and technical services.

The general rules on withholding taxes are set out in Table 1.

Table 1. Withholding tax rules

Withholding income tax CIDE royalties PIS/COFINS ISS
Transfer of technology 15% 10% Not applicable but subject to dispute 5% in São Paulo, applicable only to trademarks and advertising signs
Management/ technical services 15% 10% 9.25% 5% in São Paulo
Copyrights paid to authors 15% 10%
11% for audiovisual works
- 5% in São Paulo, applicable only to advertising signs
Copyrights paid not to author (royalties) 15% 10%
11% for audiovisual works
- 5% in São Paulo, applicable only to advertising signs
Dividends - - - -
Interest on net equity 15% - - -
Interest 15% - - -
For more information about this answer please contact: Henrique Lopes from Koury Lopes Advogados
4.3
Do double or multilateral tax treaties override domestic tax treatments?
 
Brazil
Yes. The provisions of double tax treaties executed by Brazil shall prevail over domestic legislation regarding the taxation of income covered by such treaties.

For more information about this answer please contact: Henrique Lopes from Koury Lopes Advogados
4.4
In the absence of treaties, is there unilateral relief or credits for foreign taxes?
 
Brazil
Yes. Any withholding tax paid abroad on a certain item of income may be credited up to the full amount of the corresponding corporate income tax due in Brazil on that income. Only the amount of the tax effectively paid abroad is admissible as a foreign tax credit, disregarding any tax benefits or discounts allowed by local law in the source state.

Brazilian taxpayers that avail of foreign tax credits must obtain and present the corresponding supporting documents to the Federal Revenue Service by 1 January of the year after the offset takes place. These supporting documents, in the case of withholding tax, are:

  • the payment slips and proof of withholding issued by the source country; and
  • validation of these documents by the treasury of the corresponding Brazilian embassy in the country of source or, alternatively, either of the following documents:
    • an apostille issued by the local Brazilian embassy in the source country and an official translation into Portuguese of the payment slips and proof of withholding; or
    • books that prove that the item of income in question was accrued, and documents that prove that the laws of the source country require that the local entity withhold the withholding tax in question (ie, proof that the tax is effectively due).
For more information about this answer please contact: Henrique Lopes from Koury Lopes Advogados
4.5
Do inbound corporate entities obtain a step-up in asset basis for tax purposes?
 
Brazil
Although the redomiciliation of a foreign entity to Brazil is not prohibited, this is not a common procedure. The most common entry structures for inbound corporate entities are corporate or asset acquisitions. Under these structures, the target assets or interest may be valued at fair market value without any tax implications in Brazil; but tax may be due in the country where the assets are located or where the holder of the target interest is located.

For more information about this answer please contact: Henrique Lopes from Koury Lopes Advogados
4.6
Are there exit taxes (for disposed-of assets or companies changing residence)?
 
Brazil
There is no formal exit tax under Brazilian law or regulations. However, in practice, any capital gains on disposed-of Brazilian assets will be taxable at the moment of disposition, regardless of the nationality of the taxpayer.

For more information about this answer please contact: Henrique Lopes from Koury Lopes Advogados