With the promise of a more aggressive policy in terms of trade agreements and to avoid double taxation between countries (“DTT”), to increase Brazilian competitiveness and expand our commercial relations at international level, in 2020, DTTs were approved by the Federal Senate with Switzerland, Singapore and the United Arab Emirates, the latter having been enacted by President Jair Bolsonaro, by means of Decree No. 10,705/2021, published in the Official Gazette on 27th May 2021.
In this regard, in addition to the 34 DTTs already in force with Brazil, the DTT signed with the United Arab Emirates, at the end of 2018, is also currently in effect.
The main objective of a DTT is to define the competence over taxation between countries, to ensure legal security for investors, either by defining the form of taxation in relation to certain situations or even by guaranteeing the granting of credit on the tax paid abroad.
In short, DTTs limit taxation at source in respect of certain revenues, more particularly, on dividends, interest, royalties and technical services.
Therefore, this constitutes significant progress, especially because the three jurisdictions are considered tax havens (as are the UAE), or have privileged tax regimes for certain types of companies (Switzerland and Singapore), pursuant to Federal Tax Authority Normative Instruction No. 1,037/2010 and subsequent amendments thereto.
Lastly, the recent DTTs, in particular, also contemplate the exchange of information between the tax authorities of both countries, to avoid tax evasion, as well as specific rules for dividends and interest earned by pension and pension funds. In addition, provisions were added in accordance with BEPS Project (Project on tax base erosion and profit shifting) and the OECD (Organization for Economic Cooperation and Development).