New income tax legislation (Law no. 9.430 of 27 December 1996) has introduced major changes to the global income tax system in Brazil. The areas in which changes have been introduced include: income tax calculation and collection; bad debt accrual; tax exemptions and reductions; and transfer pricing.

To harmonise domestic tax rules with global tax practices, measures such as transfer pricing and taxation of worldwide income are now included. Steps have also been taken to simplify income tax calculations and collection.

The exemption/reduction that was available on interest remittances on loans and other financial remittances such as FRN, Euronotes, Eurobonds, etc. have been abolished. These will now be subject to a 15% withholding tax. Furthermore, a 15% withholding tax will be due on remittances of interest and other expenses/fees, including foreign leasing operations and on export and financial promotion.

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