Brazil

  1. In your jurisdiction, what are the legal bases for eliminating double taxation further to a transfer pricing reassessment (European Arbitration Convention, mutual agreement procedures provided for by tax treaties)? In addition to the procedures set forth by such tax treaties, is there any other (formal or informal) domestic procedure in your jurisdiction?
  2. In addition – as the case may be – to the European Arbitration Convention, did your jurisdiction sign tax treaties with other States including an arbitration procedure? If yes, can you give the list of such States?
  3. In your experience, in your jurisdiction, how long does it take generally to eliminate the double taxation under the European Arbitration Convention and/or mutual agreement procedures set forth by tax treaties (and/or the domestic procedure if it exists)?
  4. In your jurisdiction, what are the starting point and time limit to initiate a procedure to eliminate double taxation resulting from a transfer pricing reassessment?
  5. If a reassessment is issued by your tax authorities, which State must receive the application for the international procedure to eliminate double taxation 1 The terms “international procedure to eliminate double taxation” mean the European Arbitration Convention or a mutual agreement procedure set forth by a tax treaty. (your State? the other State concerned? both States?)
  6. What are the formal conditions to initiate an international procedure to eliminate double taxation? Is there a list of documents to provide? To which department of the tax authorities (name, address) must the request be sent?
  7. In which cases would the competent authority of your jurisdiction refuse to engage/participate to the international procedure to eliminate double taxation?
  8. Is tax collection suspended during the procedure?
  9. Assuming the procedure results in an agreement on a way to cancel double taxation, how is generally such agreement implemented in your jurisdiction?
  10. In your jurisdiction, is it possible to engage concomitantly an international procedure to eliminate double taxation and litigation in front of courts? If yes, is it necessary at some stage to abandon the litigation in order to conclude/finalize the international procedure?
  11. Any other interesting aspect not addressed above?

Double Tax Treaties (hereinafter “DTTs”) signed by Brazil do not usually provide for the correlative adjustments set forth in paragraph 2 of article 9 of the OECD Model Tax Convention (hereinafter “OECD-MTC”) and the Brazilian Administrative Tax Courts do not typically apply DTT dispositions to transfer pricing matters.

There is no legal basis in Brazil to eliminate international double taxation arising from a transfer pricing reassessment of a Brazilian company. However, Brazilian Law recently established a domestic procedure in order for Brazilian companies to eliminate double taxation in Brazil arising from transfer pricing adjustments resulting from transactions performed with a controlled company abroad if the profits of said foreign controlled company are taxed in Brazil.

2. In addition – as the case may be – to the European Arbitration Convention, did your jurisdiction sign tax treaties with other States including an arbitration procedure? If yes, can you give the list of such States?

The DTTs signed by Brazil do not provide for any sort of arbitration procedure.

3. In your experience, in your jurisdiction, how long does it take generally to eliminate the double taxation under the European Arbitration Convention and/or mutual agreement procedures set forth by tax treaties (and/or the domestic procedure if it exists)?

Brazil does not establish any procedures to eliminate international double taxation arising from the reassessment of a Brazilian company on transfer pricing matters.

4. In your jurisdiction, what are the starting point and time limit to initiate a procedure to eliminate double taxation resulting from a transfer pricing reassessment?

Brazil does not establish any procedures to eliminate international double taxation regarding transfer pricing matters.

5. If a reassessment is issued by your tax authorities, which State must receive the application for the international procedure to eliminate double taxation 1 The terms “international procedure to eliminate double taxation” mean the European Arbitration Convention or a mutual agreement procedure set forth by a tax treaty. (your State? the other State concerned? both States?)

Brazil does not establish any procedures to eliminate international double taxation regarding transfer pricing matters.

6. What are the formal conditions to initiate an international procedure to eliminate double taxation? Is there a list of documents to provide? To which department of the tax authorities (name, address) must the request be sent?

Brazil does not establish any procedures to eliminate international double taxation regarding transfer pricing matters.

7. In which cases would the competent authority of your jurisdiction refuse to engage/participate to the international procedure to eliminate double taxation?

Brazil does not establish any procedures to eliminate international double taxation regarding transfer pricing matters.

8. Is tax collection suspended during the procedure?

Brazil does not establish any procedures to eliminate international double taxation regarding transfer pricing matters.

9. Assuming the procedure results in an agreement on a way to cancel double taxation, how is generally such agreement implemented in your jurisdiction?

Brazil does not establish any procedures to eliminate international double taxation regarding transfer pricing matters.

10. In your jurisdiction, is it possible to engage concomitantly an international procedure to eliminate double taxation and litigation in front of courts? If yes, is it necessary at some stage to abandon the litigation in order to conclude/finalize the international procedure?

As Brazil does not establish any procedures to eliminate international double taxation regarding transfer pricing matters, Brazilian companies could argue the matter in judicial courts.

11. Any other interesting aspect not addressed above?

Although (i) Brazilian tax legislation does not expressly provide for the elimination of double taxation arising from transfer pricing adjustments, (ii) the DTTs signed by Brazil do not provide for the correlative adjustments set forth in paragraph 2 of article 9 of the OECD-MTC and (iii) the Brazilian Administrative Tax Courts do not typically apply DTT dispositions to transfer pricing matters, in case a company domiciled abroad controlled by a Brazilian legal entity suffered a transfer pricing reassessment relating to transactions performed with its Brazilian controlling entity, such Brazilian legal entity could amend its corporate income tax calculations to exclude such transfer pricing adjustments from the taxable basis of the profits earned abroad, based on a Law enacted in 2014.

Authors

Luís Rogério G. Farinelli
Machado Associados
Stephanie J. Makin