New agreements to avoid double taxation with Brazil

With the promise of more aggressive management in terms of trade agreements and agreements to avoid double taxation between countries (“DTA”), in order to increase Brazilian competitiveness and expand our trade relations internationally, in 2020, DTAs with Switzerland, Singapore and the United Arab Emirates were approved by the Federal Senate, the latter having been enacted by President Jair Bolsonaro, through Decree No. 10.705/2021, and published in the Official Gazette of the Union on May 27, 2021.

Thus, in addition to the 34 ADTs in force with Brazil, the ADT signed with the United Arab Emirates at the end of 2018 is also in force.

The main objective of an ADT is to define jurisdiction over taxation applicable to the relationship between countries, in order to guarantee greater legal certainty for investors, whether by defining the form of taxation in relation to certain situations or even by guaranteeing the granting of credit on taxes paid abroad.

In summary, ADTs establish limits on taxation at source on certain income, more specifically on dividends, interest, royalties and technical and technical assistance services.

Therefore, this represents significant progress, especially since the three jurisdictions involved are considered tax havens (such as the United Arab Emirates), or have privileged tax regimes for certain types of companies (Switzerland and Singapore), under the terms of Normative Instruction RFB No. 1.037/2010 and subsequent amendments.

Finally, the recent agreements, in particular, also provide for information exchange mechanisms between the tax administrations of both countries to prevent tax evasion, as well as specific rules for dividends and interest earned by pension and welfare funds. Furthermore, provisions were added in accordance with the BEPS (Base Erosion and Profit Shifting) Project and the OECD (Organization for Economic Cooperation and Development) guidelines.