13/12/2023
Brazil
Brazil has a network of 36 Double Taxation Agreements - download the complete guide to see the full listing - listed in Appendix 1. Among the agreements currently in force in Latin America are Argentina, Chile, Ecuador, Mexico, Peru, and Uruguay (incorporated in 2023). Brazil did not accept the Multilateral Instrument of the Organization for Economic Cooperation and Development (MLI) to amend its existing agreements. However, in general, treaties concluded by Brazil follow the structure presented in the OECD Model Convention. Moreover, the most recent bilateral conventions reflect the country's tendency to align its agreements with the Base Erosion and Profit Shifting (BEPS) standards, including anti-abuse and anti-treaty shopping clauses. Below, we summarize the most relevant topics related to the DTAs, without prejudice to other provisions that may be important depending on the case. Prevalence of DTAs Brazilian courts have established the prevalence of treaties over domestic law. However, Brazilian tax authorities often interpret agreements in a way that limits benefits internationally accepted by the OECD. General Rules of DTAs Dividends: Dividends distributed to residents or non-residents are not subject to income tax. In any case, the 10% or 15% rate generally applies to countries with which Brazil has signed a DTAs. Interest: The 10% or 15% rate generally applies to loans. Royalties: The rate applicable to royalties derived from the use, or the right to use, cinematographic films, films or tapes for television or radio broadcasts, and any copyright of literary, artistic, or scientific works produced by a resident of a contracting state; or derived from the use, or the right to use, trademarks and patents varies in most cases from 10% to 15%. Other Common Clauses in DTAs Definition of tax residence, permanent establishment rules, taxation of capital gains, income from employment, foreign tax credit or exemption from income tax, information exchange, non-discrimination, and amicable dispute resolution procedures. Multilateral Convention on Mutual Administrative Assistance in Tax Matters The Convention, effective in Brazil since 2016, authorizes the exchange of tax-relevant information between Brazilian authorities and authorities of over 90 countries that are signatories to the Convention. This exchange can be made upon the request of the interested country or automatically. Income Tax Incidence on Services Provided by Non-Residents Abroad (DTAs) Most DTAs concluded by Brazil have protocols equating technical services to royalties, so Article 7 of the conventions exempting foreign-earned income from income tax would not apply (except for treaties with Austria, Finland, France, Japan, and Sweden). As there is no legal definition of what constitutes 'technical services,' tax authorities often use an expansive interpretation, classifying a significant part of service provision as royalties for DTAs purposes. The most recent treaties concluded by Brazil include a specific article for the taxation of technical services (such as the Brazil-Uruguay DTA). Social Security Brazil has the following totalization agreements: Ibero-American Multilateral Agreement: Argentina, Brazil, Bolivia, Chile, Ecuador, El Salvador, Spain, Paraguay, and Uruguay; Southern Common Market (Mercosur) Agreement: Argentina, Paraguay, Uruguay, and Brazil; Belgium, Canada, Cape Verde, Chile, France, Germany, Greece, Italy, Japan, Luxembourg, Portugal, South Korea, Spain, Switzerland, Quebec, United States.
