Update On Developments Dutch Qualification Brazilian 'Interest On Net Equity'

In May and December 2023, the Dutch lower Court (Court) published two decisions in which it ruled that, due to the lack of clarity on the qualification of Interest on Net Equity (IoNE) payments under the tax treaty concluded between Brazil and the Netherlands (the Treaty), i.e. as dividends (25% tax credit) or as interest (20% tax sparing credit), the outcome of a later Mutual Agreement Procedure may not be invoked to the disadvantage of the Dutch taxpayer. Therefore, the Court ruled that the Dutch taxpayer in this case could qualify IoNE as a dividend for purposes of the Treaty and the available tax (sparing) credit, i.e. a tax sparing credit of 25%.

Dutch Decree: Qualification Brazilian 'Interest on Net Equity' as interest