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Tax Overview
ones related to professional services (e.g. technical analysis, consulting engineering, geology, planning, legal services among others) will be subject to the following withholding obligations: IRRF (1.5%), CSLL (1%), PIS (0.65%) and COFINS (3%).
• Customers qualifying as public entities or mixed-capital companies: The payment or credit for provision of goods and services will be subject to the following withholding obligations: IRRF (1.2% or 4.8%), CSSL (1%) rate, PIS (0.65%) and COFINS (3%).
In addition to the withholding obligations mentioned above, the customers will also withhold the Social Security Contribution (INSS) at 11% on secondment services (cessão de mão de obra) or contract work (empreitada).
The abovementioned withholding obligations are deemed as anticipation of the taxes to be paid by the Brazilian company.
7. Brazilian Tax on Foreign Com- panies
7.1. Foreign Branch
According to Brazilian corporate rules, the branch and the foreign entity are deemed as a single legal entity. From a tax perspective, however, the relevant branch is deemed as a separate entity and is taxed under the same rules applied to Brazilian companies. Note, as there is no tax consolidation in Brazil,
there is no specific benefit in creating a branch rather than a subsidiary.
7.2. Payment, Credit or Remit- tance of Service Income and Royalties
As a general rule, Brazilian tax law may tax foreign companies with respect to (i) income or capital gains taxes paid, credited or remitted by a Brazilian source of payment, as well as (ii) capital gains taxes triggered in transactions between non-resident companies with respect to the sale or disposition of assets located in Brazil.
Except for listed situations, the general WHT rate applied to payment, credit or remittance of income to foreign entities located
in regular jurisdiction, is 15%, while in transaction entered with parties located in “low tax jurisdiction” (or “tax heaven”) are subject to a higher 25% rate.
The Brazilian IRS lists the low tax jurisdiction, which are: American Samoa, American Virgin Islands, Andorra, Anguilla, Antigua, Aruba, Ascension Islands, Bahamas, Bahrain, Barbados, Barbuda, Belize, Bermuda Islands, Brunei, British Virgin Islands, Campione D’Italia, Cayman Islands, Channel Islands (Alderney, Guernsey, Jersey, and Sark), Dominica, Cook Islands, Curaçao, Cyprus, Djibouti, French Polynesia, Gibraltar, Grenada, Hong Kong, Ireland, Isle of Man, Kiribati, Labuan, Lebanon, Liberia, Liechtenstein, Macao, Maldives, Mauritius Islands, Marshall Islands, Monaco, Monserrat Islands,
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