Law 9249/95 enacted changes to withholding tax rates effective 1 January 1996. Article 28 of the changes has been interpreted by tax specialists to include royalties and therefore a withholding tax rate of 15% would apply. However the tax authorities maintained that royalties are not included and a rate of 25% continues to apply. On 22 May 1996, the Government affirmed in a provisional measure that royalties were to be taxed at the 15% rate, however the measure is only effective from 22 May 1996. This may mean if the tax authorities continue with their interpretation, that for the first part of 1996 the rate will be 25%, falling to 15% from 22 May 1996 onwards.

This article was correct as of 1 April 1997.

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.

For further information contact Carlos S Romero, Deloitte Touche Tohmatsu, Sao Paulo, Brazil on Tel: +55 11 257 0122, Fax: +55 11 258 8456