United Kingdom of Great Britain and Northern Ireland (“UK”)
signed, on November 29, 2022, the Convention on the Elimination
of Double Taxation in relation to Taxes on Income and on
Capital, as well as for the prevention of Tax Evasion and Avoidance (“Treaty”).
The Treaty, which is still being processed by the Ministry of Foreign Affairs, will enter
into force after the completion of legislative and ratification procedures in
Brazil and the United Kingdom and the exchange of notes between the two countries, as well as
is in accordance with the Model Convention adopted by the OECD.
Among its main objectives, the Treaty seeks to establish security
legal and promote the increase of bilateral trade flows and attraction
of investments for both countries, in addition to establishing the following
measurements:
1. Establishes the application of rates of 10% to 15% on
dividends paid between countries, and rules to avoid double taxation, if
taxation at source be established on dividends distributed by
Brazilian companies.
2. Establishes the rate of 15% for taxation at source on interest
(including interest on equity), and exemption for payments
made to a pension plan or to the Government of the other Contracting State;
7% rate for banks or insurance companies in financing for
infrastructure or public utility projects with a minimum term of 5
years, and; 10% rate on transactions with banks or insurance companies in
general, securities traded on the stock exchange and credit sales of machines and
equipment.
3. Establishes a more beneficial rate of 10% for all types of
royalties (most of the treaties ratified by Brazil provide for a rate of
15% as a limitation for taxation at source on the payment of
royalties to beneficiaries resident in both contracting jurisdictions).
4. Authorizes taxation at source on payments for
remuneration for services of a managerial, technical or other nature
consultancy, with application of regressive rates: 8% during the
first two years of the Treaty's validity, 4% during the third and
fourth year, and 0% after the fourth year.
5. Establishes that, if Brazil adopts, with any other country
OECD member, except Latin American countries, lower rates,
said reduced rates will be automatically applicable to the
Treaty.
6. Establishes the adjustments corresponding to transfer prices
(transfer principle) through an amicable procedure, in line with the
guidelines established by the OECD, and with the possible convergence of
Brazilian transfer pricing rules to the model provided for by this
Organization.
Finally, the Treaty will promote the suspension of old agreements signed
between Brazil and the United Kingdom, mainly:
(i) Agreement to Avoid Double Taxation of Profits Arising from
Maritime and Air Transport, signed in Brasilia on July 27, 2005,
e;
(ii) Agreement to Avoid Double Taxation of Salaries, Wages and
Other Remuneration Earned by Aircraft Crew Member
Operated in International Traffic, signed in Brasilia on September 2
2010, which will no longer have any effect.
Montgomery & Associates, is available to clarify any
doubts related to the topic in question
