Page 36 - Demo

Doing Business in Brazil
36
Nauru, Niue Island, Norfolk Island, Occidental Samoa, Oman, Panama, Pitcairn Islands, Qeshm Island, Santa Lucia, Saint Vincent & Grenadines, Saint Helena Island, San Marino, Saint Martin, Saint Pierre and Miquelon, Seychelles, Solomon Islands, Swaziland, Tonga, Tristan da Cunha, Turks & Caicos Islands, United Arab Emirates and Vanuatu.
7.3. Capital Gains
Capital gains may be triggered at the foreign company´s level in case of sale of assets located in Brazil. WHT will apply with progressive rates varying from 15% to 22.5% depending on the value of the gains.
7.4. Dividends
In Brazil, dividend distributions are exempted from corporate income tax, both when they are distributed to Brazilian residents and to foreign shareholders.
Profits arisen from investments
in a company headquartered in Brazil can also be distributed as interest on equity (juros sobre capital próprio). Differently from
the dividends, interests on equity
are deductible from corporate income tax basis, qualifying as a mechanism of tax planning, provided that certain conditions are met. However, the relevant payment, credit or remittance is subject to
15% WHT or to 25% WHT when they are distributed to the shareholders located in low tax jurisdictions.
7.5. Double Tax Treaties
Brazil is a party of many treaties aimed at preventing double taxation in international transactions, which follows the OECD (Organization
for Economic Co-operation and Development) model convention.
Brazil has treaties entered with Argentina, Austria, Belgium, Canada, Chile, China, the Czech Republic and Slovakia, Denmark, Ecuador, Finland, France, Hungary, India, Israel, Italy, Japan, Luxembourg, Netherlands, Mexico, Norway, Peru, Philippines, Portugal, Russia, Spain, South Africa, South Korea, Sweden, Trinidad
and Tobago, Turkey, Ukraine and Venezuela.
7.6. Brazilian Cross-Border Tax Anti-Avoidance Rules
Brazilian tax law also provides transfer pricing, thin capitalization, substance requirements and Controlled Foreign Companies (“CFC”) rules, under which there
are certain minimum revenues and additional deductibility requirements for Brazilian companies engaged
in transactions with foreign related parties and with companies located in low tax jurisdiction, or subject to “privileged tax regimes”.
The Brazilian IRS also lists the “privileged tax regimes”, which are:
i. With respect to the legislation of Uruguay, the regime applicable to the “Inversion Financial Entities” (Safis) incorporated until December 31, 2010;