DOING BUSINESS IN BRAZIL

Posted By Romain Ponsot on Oct 6, 1907 in Doing Business


Date de publication : 06-10-1907

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The following information are for the sole purpose  of providing a general overview of  the local taxation of the Corporate tax aspects of the country. In any case, the information provided below cannot be considered as comprehensive or deemed to constitute specific legal advice.

Yes we tax in Brazil

Flash News

Specific tax treatments in Brazil:

  • Goodwill amortization

New tax reform:

  • Brazilian tax authorities confirm withholding tax on payments for technical service and technical assistance under the Brazil and Argentina tax treaty.
  • Brazilian tax authorities confirm withholding tax on payments for technical service and technical assistance under the Brazil and Canada tax treaty.

New tax treaties:

  • Tax treaty between Brazil and India is approved by Brazilian Chamber of Deputies.
  • Tax treaty between Brazil and Russia is approved by Brazilian Chamber of Deputies.
  • Tax treaty between Brazil and Vietnam is under negotiation.

Local tax advisors

No specific information on the local tax advisors.

Useful links

Website Ministry of Finance: Click here

Website Tax administration: Click here

Permanent Establishment

There is no domestic definition of Permanent Establishment. However there are situation where non-resident are considered as taxable units in Brazil, and subject to CIT on their revenues deemed to be derived from their activity in Brazil.

Resident companies are taxed on their worldwide income (« worldwide principle »).

Entities are considered to be domiciled (meaning resident) for tax purposes in Brazil if their regular place incorporation is in Brazil, or if their place of management & control is in Brazil.

Note: the definitions of permanent establishment and place of residence are subject to the relevant provisions of any applicable double tax treaty, if any.

Corporate Income Tax

The general CIT tax rate is 15% plus 10% (surtax).

Note: in addition, there is a list of services which are subject to PIS and COFINS. In that case, the amounts withheld at the time of the payment are creditable against the final liability (same mechanism than a VAT).

Specific Deductible expense

  • Goodwill amortization

Non-taxable income includes the following:

  • Dividends received from qualifying participations

Non-deductible expenses includes the following:

  • Dividends benefiting from the participation exemption
  • Interest in excess of the thin-capitalization threshold
  • CIT and similar taxes (including foreign withholding taxes);

Carry forward: Yes, losses may be carried over indefinitely by a company, unless the company cumulatively changes its ownership and its core activities.

Note: carry forward is capped at 30% of income taxable bases in a given taxable year.

Carry back: No

Companies should submit the tax return annually before the end of September of the following year.

Annual tax returns are established by the company on a self-assessment system.

Companies shall pay advance payments; and the balance must be assessed on 31 December (in the case where fiscal year coincides with calendar year).

Whithholding Taxes (payment to foreign companies)

The local tax rates in Brazil are the following, subject to the provisions of an applicable double tax treaty, if any.

There is no WHT on the profits paid from a branch to its foreign head office.

The general rate of WHT on dividends is 0% of the gross amount.

Note: 25% if recipient is resident of a low tax jurisdiction

The general rate of WHT on interest is 15%.

Note: 25% if recipient is resident of a low tax jurisdiction

The general rate of WHT on Royalties is 15%.

Note: 25% if recipient is resident of a low tax jurisdiction

The general rate of WHT on management fees is 15%.

The general rate of WHT on technical services is 15%.

Note: 25% if recipient is resident of a low tax jurisdiction

Capital gains

Generally, capital gains are taxed under the regular CIT as general income.

VAT

No specific information

No specific information

No other specific information of VAT in Brazil.

Miscellaneous

The general statute of limitation is 5 years.

There is foreign exchange control in Brazil. Income and capital could be repatriated, subject to regulations of the central bank.

There are thin capitalization rules in Brazil. The interest derived from loans between related parties may not be deductible in case where interest exceeds some ratios (2 times the taxpayer’s net equity).

Furthermore, the interest rate must not exceed the market rate.

Do not hesitate to share your experience in Brazil with us in the comments below. Any comments are welcome !

Romain Ponsot

Romain est conseiller en fiscalité au sein d’un leader mondial du shipping. Grâce à son expertise tant en matière de TVA, fiscalité internationale, problématiques intragroupe qu’en matière de fiscalité des particuliers, Romain vous guidera au travers d’articles professionnels et humoristiques. 

Romain, poète dans l’âme, aime particulièrement le couscous et passe beaucoup de temps à glacer ses souliers. Profil LinkedIn
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