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Foreign tax credits granted with respect to monthly income tax calculations for individual Brazilian taxpayers have been amended by a ruling issued in April 1996.
The ruling provides that taxpayers with foreign sourced income that is included in their monthly income tax calculations, can now offset any foreign tax assessed on the income against the amount of monthly tax due. The foreign tax credit may not exceed the difference between the Brazilian tax liability without including the foreign sourced income in the taxable base, and the tax due after such inclusion.
Prior to the amendment, individuals had to incur temporary double taxation on the same income during the tax year. The foreign tax credit was allowed to be only against the annual income tax payable in April of the year following the tax year.
Furthermore, where a double taxation treaty exists, the foreign tax credit is available to the extent that the source country does not authorize reimbursement or deduction of the tax concerned. Where no treaty exists, the amendment will apply where a reciprocal treatment is granted by the source country in relation to Brazilian sourced income
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
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