ARTICLE · 03 DECEMBER 2013

InterpretationOof Tax Treaties

TozziniFreire Advogados

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On August 8, 2013, the Brazilian Federal Revenue Secretariat, through a division named General Coordination of Taxation, issued an important interpretation that a specific legal provision in Brazil does not violate international tax treaties executed by the country to avoid double taxation.

BrazilTax

Ana Cláudia Utumi

Gustavo Nygaard

Rafael Mallmann

Leonardo Azevedo Ventura

Jerry Levers De Abreu

Marco AntôNio Ruzene

Maurício Braga Chapinoti

Vinicius Jucá Alves

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On August 8, 2013, the Brazilian Federal Revenue Secretariat, through a division named General Coordination of Taxation ("COSIT"), issued an important interpretation that a specific legal provision in Brazil does not violate international tax treaties executed by the country to avoid double taxation.

Based on such specific legal provision (Section 74 of Provisional Measure 2,158-35 of 2001), Brazilian tax authorities consider that the profits derived from the participation in a foreign company become available to the Brazilian entity immediately upon being recorded in the balance sheet of the foreign company at the end of each fiscal year. As a result, these profits become subject to Brazilian corporate income taxes regardless of being actually distributed to the Brazilian entity.

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