Corporate Tax 2010 - BMR Advisors

Chapter 6
Brazil
Luciana Rosanova Galhardo
Pinheiro Neto Advogados
Luciano de Almeida Prado Neto
1 General: Treaties
1.1 How many income tax treaties are currently in force in
Brazil
Currently there are twenty-eight treaties in force in Brazil, firmed
with Argentina, Austria, Belgium, Canada, Chile, China, Czech
Republic, Denmark, Ecuador, Finland, France, Hungary, India,
Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands,
Norway, Philippines, Portugal, Slovakia, South Africa, Spain,
Sweden and Ukraine.
1.2 Do they generally follow the OECD or another model
Although Brazil is not an OECD member, it adopts the OECD
model in its treaties.
1.3 Do treaties have to be incorporated into domestic law
before they take effect
The Brazilian Federal Constitution establishes that once the treaty
is signed, the President must submit the document to the Brazilian
National Congress, in the form of a “message”. This message
contains the text of the treaty and an explanatory memorandum,
usually drafted by the Brazilian Minister of Foreign Affairs. Based
on the message, the Brazilian National Congress prepares a Project
of a Legislative Decree which, in general, consists of a few articles
with the treaty attached. This project is reviewed and discussed in
the House of Representatives (Câmara dos Deputados) and then in
the Senate (Senado Federal). If the Project of the Legislative
Decree is approved, the President must then ratify its text.
1.4 Do they generally incorporate anti-treaty shopping rules (or
“limitation of benefits” articles)
Some of the treaties signed by Brazil assumed that the entity or
individual that is entitled to the income should be its effective
beneficiary, thereby excluding from its scope entities that are mere
channels for retransmission of income, with no other real object but
using its benefits.
Moreover, some of the treaties recently concluded by Brazil
specifically contemplate this subject and the treaty shopping
limitations on what concern to dividends, interest and royalties.
1.5 Are treaties overridden by any rules of domestic law
(whether existing when the treaty takes effect or
introduced subsequently)
The treaties and conventions signed and dully approved by the
Brazilian authorities prevail over the existing rules that are contrary to
their dispositions, and must be observed by the subsequent legislation.
2 Transaction Taxes
2.1 Are there any documentary taxes in Brazil
There are no stamp duties in Brazil. Nevertheless, the registration
of documents in the Board of Trade, such as companies’ bylaws or
corporate documents, is subject to the payment of certain duties.
2.2 Do you have Value Added Tax (or a similar tax) If so, at
what rate or rates
There is the State Value Added Tax, denominated ICMS, that is
assessed over the transmission of goods, telecommunication and
inter-municipal transportation services, at rates which vary from
7% to 25%.
There is also the Federal Value Added Tax, denominated IPI and
assessed over the sales value of industrialised products, at rates that
vary pursuant to the product classification in the Harmonized Table
for the Classification of Products.
Finally, there are the Contribution to the Formation of the Social
Security - COFINS and the contribution to the Profit Participation
Program - PIS that are due over the gross billings of the companies
and have a non cumulative regimen that works in a manner similar
to a VAT.
2.3 Is VAT (or any similar tax) charged on all transactions or
are there any relevant exclusions
Each tax has its system and thus its own exceptions, but on a
general term, all transactions are subject to the above VAT taxes.
The most relevant exclusion is in the case of exports of products,
which are benefited by reductions of the taxes or the granting of
presumed credits.
2.4 Is it always fully recoverable by all businesses If not,
what are the relevant restrictions
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The VAT is usually fully recoverable and, in the cases where the
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