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The deductibility of royalty expenses (for the use of trademarks, patents or industrial designs) and withremuneration for technology transfer and the provision of technical support by a subsidiary, is limitedto a maximum of 5% of net sales revenue, with due regard to the specific limits for each industrialactivity sector (Ordinance 436/58 of the Ministry of Finance). The tax deductibility for the use oftrademarks is in all cases limited to 1%.The tax deductibility of the remittances to the licensor or grantor overseas depends not only on theregistration of the respective contracts with INPI, but also their registration with BACEN, today doneelectronically by the commercial bank responsible for the payment remittance, through the ElectronicDeclaratory Registration (Registro Declaratório Eletrônico – RDE), in which the conditions registeredand authorized by INPI are checked online, at the time of the remittance.Controlled companies established in Brazil may also remit royalties for the exploitation of inventionpatents, use of trademarks and remuneration for technology transfer and the provision of technical,scientific or similar support services to their parent companies abroad.INPI, based on its own interpretation of the federal tax legislation, understands that generally theamount to be remitted in cases of control relations may also not exceed the maximum annual limit ofup to 5% of net sales revenue of the product manufactured or sold.At the time of the remittance of royalties, remuneration for technical support and similar services orpayment for technology transfer, there is withholding of Income Tax at Source (IRF), at the rate of15%, except when there is an international agreement to avoid double taxation determining a lowerrate (art. 710 of the RIR and art. 2A of Law 10,168/00). However, if the royalty remittance is made infavor of a person domiciled in a Tax Haven, the aforesaid rate rises to 25% (art. 685 of the IncomeTax Regulation (RIR)). This position was recently reaffirmed in art. 17 of Normative Instruction(Instrução Normativa – IN) 1,455/2014.In addition to IRF, the remittance will also be subject to the payment of the economic domainintervention contribution (CIDE) at the rate of 10%, which is earmarked for funding technologicaldevelopment and interaction programs between Brazilian universities and research centers andprivate enterprise (art. 2 paragraph 4 of Law 10,168/00).Remittances abroad for the payment of technical, management and similar support services that donot imply technology transfer are also subject to the payment of IRF and CIDE (art. 2 paragraph 2 ofLaw 10,168/00).In addition to the IRF and the CIDE, remittances of royalties are also subject to IOF (IOF-Câmbio) atthe rate of 0.38% on the amount of the remittance (art. 11 of Decree 6,306/07).26