Author: Giovana Ferreira

Chamber of Deputies Advances International Agreements to Prevent Double Taxation with Chile and Poland

On February 14, 2025, the Brazilian Chamber of Deputies approved Legislative Decree Bill No. 261/2024, which ratifies the Agreement between Brazil and Poland for the Elimination of Double Taxation, signed in New York in September 2022. The approved text follows the OECD model conventions, enhancing the prospects for cooperation between the respective tax administrations.

In line with Brazil’s policy of alignment with international standards, the Chamber also forwarded to the Federal Senate, on April 16, 2025, Legislative Decree Bill No. 722/2024, which updates the agreement initially concluded between Brazil and Chile in 2001.

The revised text, also signed in 2022, aims to modernize the bilateral convention considering Brazil’s commitments under the BEPS Project. It incorporates provisions addressing treaty abuse prevention, greater tax transparency, and enhanced international cooperation.

Both proposals are currently pending deliberation in the Federal Senate.

 

Brazil-Norway Double Taxation Agreement Enacted

On March 14, 2025, Decree No. 12,406/2025 was enacted, formalizing the new Agreement between Brazil and Norway for the Avoidance of Double Taxation. This treaty replaces the prior agreement signed in 1981 and brings its provisions into alignment with OECD standards.

Among the key developments are specific provisions addressing offshore activities: when such activities are carried out for more than 30 days within a 12-month period, a permanent establishment is deemed to exist, thereby triggering local taxation rights.

The new agreement also redefines withholding tax limits on income derived from interest, royalties, and technical services. Notably, it introduces a most-favored-nation clause and incorporates rules concerning controlled foreign corporations (CFCs).

In parallel with the tax treaty — now in force — Brazil and Norway are also progressing in negotiations toward a bilateral social security agreement.

 

Double Taxation Agreement between Brazil and Germany: Prospects for Resuming Negotiations

The current legal and political climate between Brazil and Germany has fostered a favorable environment for the reopening of discussions aimed at establishing a new Double Taxation Agreement (DTA) between the two countries.

The previous treaty, in force from 1975 to 2005, was unilaterally terminated by Germany due to incompatibilities with its domestic legislation—particularly concerning transfer pricing rules, tax sparing and matching credit clauses, and the tax treatment of royalties and technical services.

However, the more recent treaty models adopted by both jurisdictions reveal a growing convergence of positions, which may help overcome the obstacles that previously led to the termination. This renewed alignment could pave the way for future negotiations toward a modernized treaty consistent with prevailing international standards.

 

Legislative Decree No. 167/2025 Updates Brazil-Sweden Treaty to Avoid Double Taxation

On May 5, 2025, Legislative Decree No. 167/2025 was published, approving the Protocol amending the Convention between Brazil and Sweden for the Avoidance of Double Taxation on income. This measure updates the treaty originally signed in 1975, aligning its provisions with international standards.

The revised text seeks to enhance mechanisms for the elimination of double taxation, while also introducing more specific criterion for identifying the agreement’s eligible beneficiaries. It further strengthens procedures for resolving tax disputes between taxpayers and the tax administrations of both countries.

Finally, the Protocol aims to revise the rules governing the exchange of tax information, in order to promote greater transparency and reinforce efforts to combat tax evasion.

Although approved by the National Congress, the amended text is still pending promulgation by the President of the Republic.

 

Federal Revenue Reaffirms Taxation on Reimbursements under Cost Sharing Agreements

On March 18, 2025, the Brazilian Federal Revenue Service (Receita Federal) published Private Ruling No. 39/2025, analyzing the tax treatment applicable to outbound remittances made under cost sharing agreements.

In its ruling, the tax authority reaffirmed the position already established in previous precedents, concluding that the following taxes apply to amounts remitted as reimbursement of expenses and costs incurred under such agreements: Withholding Income Tax (IRRF), Contribution for Intervention in the Economic Domain (CIDE), and the PIS and COFINS-Importation contributions.

The case involved a cost sharing contract that: (i) did not include any profit margin on the allocated amounts; (ii) provided proportional allocation of costs among the beneficiaries based on objective criteria; and (iii) covered administrative support activities, such as services rendered by accountants, lawyers, and administrative professionals.

Despite these features, the Federal Revenue concluded that the taxes were applicable, asserting that the shared services qualify as technical services for tax purposes. According to the ruling, the existence of a cost sharing agreement or the absence of a profit margin in the reimbursed amounts is not relevant to the characterization of the payments for tax purposes.

 

Bill No. 1,087/2025: Changes to Income Tax and Taxation of Dividends Paid Abroad

Bill No. 1,087/2025 proposes significant changes to the taxation of individual income, notably introducing a Minimum Individual Income Tax (IRPFM). This new tax bracket would apply to annual income exceeding BRL 600,000, with additional progressive rates, increasing the tax burden on so-called “super-rich” individuals.

The bill also introduces taxation on dividends paid by Brazilian companies to beneficiaries abroad. The proposed rate is 10%, withheld at source. If the combined effective rate of Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL), plus the dividend tax, exceeds the nominal corporate tax rate, the non-resident recipient would be entitled to a tax credit on the difference.

The proposal has sparked debate among experts and market participants, particularly regarding its potential effects on the attractiveness of foreign investments. Questions have also been raised about the compatibility of these measures with international tax treaties aimed at preventing double taxation.

As Bill No. 1,087/2025 is still in the early stages of legislative review, it may undergo significant changes before its eventual approval. We recommend close monitoring of its legislative developments to assess potential impacts and consider strategic alternatives for the reorganization of asset and tax structures.

 

Economic Reciprocity Law: Brazil May Adopt Countermeasures Against Foreign Trade Barriers

Approved in April, Law No. 15,122/2025 authorizes the Brazilian government to adopt retaliatory measures against countries or economic blocs that impose trade or regulatory barriers harming national competitiveness. Known as the Economic Reciprocity Law, the regulation allows for the suspension of international commitments and the imposition of restrictions on imports, investments, and even intellectual property rights.

In the tax arena, the law also permits the use of levies such as Cide-Technology and Condecine as retaliation tools. This possibility has drawn criticism for allegedly violating the principle of tax legality, by allowing the Executive to alter rates without legislative approval and diverting these levies from their original purposes, directly affecting the technology and audiovisual sectors.

Although the law still requires regulation for practical implementation, it demands attention from companies with international operations, particularly those with contracts involving royalties, licenses, and technology transfers. Monitoring upcoming developments will be essential to anticipate risks and potentially influence decisions through public consultations.

 

Tax Reform Updates: New guidelines on accessory obligations

Within the scope of the Tax Reform, it was established that States, the Federal District and Municipalities must adapt their Electronic Tax Document authorization systems to adopt a standardized layout, which allows taxpayers to inform data related to IBS, CBS and IS.

In view of this, the new parameters for issuing tax documents related to the new taxes have already been created, by means of Technical Note 2025.002-RTC, with the implementation date in the production environment scheduled for October 2025, in order to enable their effective operation as of January 2026.

Throughout 2025, the information related to IBS, CBS and IS will be optional and will not be validated. As of January 2026, the new validation rules will be applied.

Finally, as discussions involving the implementation of the Tax Reform are still ongoing, these new parameters may be adjusted throughout the implementation process.

 

Brazil’s Superior Court of Justice to rule on IRRF levy on payments for technical services to countries with Tax Treaties

Brazil’s Superior Court of Justice has assigned to the repetitive rite the Special Appeals that deal with the legality of levying Withholding Income Tax (IRRF) on amounts remitted abroad for payment of technical services, without transfer of technology. The aim is to standardize the Court’s case law.

The common point between the cases is that the beneficiaries of the remittances are residents of countries with which Brazil has signed Tax Treaties, specifically Portugal, Argentina, Belgium, Canada, China, Italy, Sweden and Israel.

The controversy lies in defining the legal nature of remittances for technical services that do not involve the transfer of technology (know-how), whether they are qualified under the Tax Treaty as royalties (article 12), as the Brazilian Federal Revenue Service argues, or as business profits (article 7), in which case taxation is exclusive to the country of residence.

The Court’s case law had been for the application Article 7, which prevents the levy of Withholding Tax on remittances abroad, as long as the technical services did not involve the transfer of technology. However, since 2020, the Court has taken the view that when the Treaty Protocol equates the concept of royalties in Article 12 with technical services, the application of Article 7 is not automatic.

With the judgment of the cases, it is expected that the Superior Court of Justice will analyze the case considering the particularities of each tax treaty, given that not all have the same provision on technical services, and especially that the Conventions signed with the other countries will be respected.

 

United Arab Emirates and Austrian Holding Company removed from the list of tax havens and privileged regimes in Brazil

Brazil’s Internal Revenue Service has excluded the United Arab Emirates from the list of low-tax jurisdictions, the so-called tax havens. Even before removing them from the list, the Brazilian government had signed a Tax Treaty with the United Arab Emirates, in force since May 2021.

The removal is in line with a change in the qualification of countries as low-tax jurisdictions or privileged tax regimes, promoted in 2024 by Brazilian tax legislation: the qualification of countries as tax havens, which stems exclusively from the non-taxation of income at the maximum rate of 17%, may exceptionally be removed for countries that invest significantly in Brazil.

In the same act, the Brazilian Federal Revenue Service excluded the Austrian tax regime for holding companies, which do not carry out substantive economic activity, from the list of privileged tax regimes. The Austrian holding company regime had been on the list since 2016.

As a result, for example, transfer pricing rules and more burdensome thin capitalization rules will no longer automatically apply to companies that carry out transactions with other companies in the United Arab Emirates or with holding companies in Austria.

 

Joint Resolution BCB and CVM No. 13/2024

On December 3, 2024, the Central Bank of Brazil and the Brazilian Securities and Exchange Commission (CVM) jointly issued Resolution No. 13/2024, establishing updated rules applicable to investments by non-resident individuals and legal entities in the Brazilian financial and capital markets.

The new regulatory framework aims to foster a more favorable environment for foreign investments by reducing compliance costs and aligning local requirements with international standards. The key changes introduced include:

1. Non-resident Accounts in Brazilian Reais (CNR): Non-resident investors are now allowed to invest in financial assets through CNRs. Legal entities using their own CNRs may be exempt from appointing a local representative and registering with the CVM, except when investing in securities governed by Law No. 6,385/1976.

2. Abolishment of Simultaneous Exchange Transactions and RDE-Portfolio Registration: The obligation to carry out simultaneous exchange transactions or international transfers in reais, as previously required under Resolution CMN No. 4,373, has been eliminated. Likewise, the requirement to register portfolio investments in the RDE-Portfolio system has been revoked.

3. Restrictions on Use of Offshore Accounts for Securities Acquisition: Financial transactions conducted through offshore accounts for the acquisition of securities are expressly prohibited, except for derivatives involving agricultural commodities traded within Brazil, subject to applicable regulations.

4. Expansion of Eligible Assets for Depositary Receipts: The regulation expands the list of underlying assets eligible for Depositary Receipts to include securities issued by securitization companies, investment funds, and other CVM-supervised entities.

5. Simplified Requirements for Individual Non-Residents: Individual investors are exempt from appointing a local representative and registering with the CVM, provided their investments via CNR or other means do not exceed BRL 2 million per intermediary per month.

6. Additional Provisions: Investors undergoing a change in residency status may maintain existing investments under originally agreed terms.

Also, a risk-based approach is adopted for document retention and information requirements, with a ten-year retention period for supporting documentation.

 

Brazil amends Pillar 2 rules

Brazilian Federal Revenue Office has enacted a new Normative Instruction to amend Normative Instruction n. 2.245/2024, which regulates the Pillar 2 rules in Brazil.

In a summary, the new Instruction includes a reference to the need to apply Brazilian rules when foreign entities calculate the Income Inclusion Rule (IIR) and the Undertaxed Payment Rule (UTPR) in relation to Brazil. It is important to highlight the country only adopted the Qualified Domestic Minimum Top Up Tax (QDMTT) from Pillar 2 rules.

The new regulation also includes a reference to OECD Guidelines on GloBE rules (Commentaries on the Model Rules) as subsidiary sources for interpreting Brazilian rules.

In addition, the normative instruction improves the translation of the Pillar 2 rules, in order to facilitate the interpretation of expressions such as “Constituent Entity” (Pillar 2) and “entity forming part of a multinational group” (CbCR) for the purposes of applying the safe harbors.

The changes made to Normative Instruction 2228/2023 are the result of suggestions made by taxpayers when the rule was still under public consultation.

 

Tax Reform – Approval of Complementary Law 214

The recent enactment of Complementary Law No. 214, dated January 16, 2025, marks a significant step in Brazil’s tax reform. This legislation establishes the Tax on Goods and Services (IBS) and the Social Contribution on Goods and Services (CBS), aiming to simplify and modernize the national tax system. These new taxes will replace PIS, Cofins, ICMS, and ISS.

The main change introduced by the reform is the implementation of a dual Value-Added Tax (VAT) system, consisting of CBS and IBS. This new structure seeks to eliminate tax cascading throughout production chains, applying taxation only to the added value at each stage. Additionally, the law provides for the creation of the Selective Tax (IS), which will be levied on products considered harmful to health and the environment, with the goal of discouraging their consumption.

The implementation of the new tax system will be carried out gradually. In 2026, CBS and IBS will be tested nationwide, with rates of 0.1% and 0.9%, respectively. The full transition to the new system is expected to be completed by 2033.

The Complementary Law also establishes differentiated tax regimes for various sectors. For example, education and healthcare services, medical devices, and food for human consumption will have a 60% reduction in the standard tax rate. Another example is independent professionals, who will benefit from a 30% reduction in the rate.

The expectation is that the tax reform will simplify the current system by unifying taxes and eliminating cascading effects. Additionally, the implementation of differentiated regimes aims to address the specific needs of various sectors.

 

Accelerated Depreciation Benefit for Tankers and Support Vessels – Law No. 15,075/2024

On December 26/2024, Law No. 15,075/2024 was enacted, primarily aimed at allowing the transfer of excess local content between oil and natural gas exploration and production contracts.

Additionally, the law permanently incorporates into federal tax legislation the accelerated depreciation tax benefit, which was previously established under Provisional Measure (PM) No. 1,225/2024.

Provisional Measure No. 1,225/2024 had extended the possibility of applying differentiated accelerated depreciation rates. Initially, this benefit was granted to new machinery, equipment, devices, and instruments classified as fixed assets. The PM expanded the benefit to include new tankers produced in Brazil, classified as fixed assets, and exclusively used for coastal shipping (cabotage) of oil and its derivatives.

The new Law No. 15,075/2024 not only maintains this expansion but also broadens the scope of the tax benefit. Now, maritime support vessels used for logistics support and service provision in offshore fields, facilities, and platforms are also eligible for accelerated depreciation.

 

Energy Transition Acceleration Program – Law No. 15,103/2025

Law No. 15,103/2025 established the Energy Transition Acceleration Program (Paten), aimed at promoting the financing of sustainable development projects. This includes infrastructure works, modernization, and the implementation of energy production parks based on sustainable sources, as well as research and technological innovation with socio-environmental benefits in Brazil.

The law introduced the possibility of tax settlement agreements conditioned on these investments, allowing companies to negotiate debts with the federal government according to their project timelines.

The priority sectors include, among others, the production of sustainable fuels such as biogas, biomethane, and low-carbon hydrogen, as well as the expansion of renewable energy sources like solar, wind, nuclear, and biomass. The program also supports the replacement of polluting energy sources, waste-to-energy projects, the development of energy storage systems, and investments in infrastructure for clean fuels. Additionally, initiatives focused on decarbonizing the transportation sector and manufacturing vehicles powered by sustainable fuels are part of the program’s scope.

The law also created the Sustainable Development Guarantee Fund, known as the Green Fund, managed by BNDES. This fund will act as a guarantee mechanism for financing projects under Paten. Companies will be able to contribute tax credits and government-issued debt securities to the fund, receiving participation quotas that can be used as guarantees for financial transactions.

With regulatory provisions still pending from the Executive, the program is expected to provide greater security for investors and companies interested in sustainable projects.

 

New Betting Rules Has Come into Force

Online betting activities began to be regulated in Brazil in 2023. Since then, the federal government has issued several regulatory norms on bookmakers’ authorization, limitations on advertising and procedures to prevent money laundering. This new regulatory framework came into force on January 1^st, 2025.

The most striking thing is that 12% of the Gaming Gross Revenue (GGR) collected by online bookmakers must be passed onto public and private entities, including sports clubs and federations.

So far, it is not clear whether such levies should qualify as tax or not. If so, the rules for calculating and paying these expenses will have to comply with the general rules and principles of tax law.

In addition, the Ministry of Finance’s Department of Betting has not yet fully detailed the form of passing on the resources to some of the beneficiaries. As a result, this generates a great deal of legal uncertainty, which makes it difficult for bookmakers to operate. The betting industry hopes that online betting activities will be better regulated by the end of this year.

 

Supreme Court to Decide whether Foreign Profits Must be Taxed in Brazil

The Supreme Court will decide whether the Double Tax Treaties signed between Brazil and other countries should rule out the corporate Brazilian taxation on profits earned by controlled and affiliate companies abroad.

The central discussion is whether Article 7 of the Tax Treaties that follow the OECD model should prevail over Brazilian domestic rules on world-wide corporate income taxation. If so, profits earned abroad would be exempt from IRPJ and CSLL (corporate income taxes).

Currently, the Superior Court of Justice and the Administrative Council of Tax Appeals still do not have a consolidated position on the subject. With the Supreme Curt’s decision, the issue will be definitively settled.

The trial was already under analysis by the Supreme Court in 2024. However, it suffered two interruptions. Now, the court has scheduled the discussion to resume in the Virtual Plenary between February 7^th and 14^th, 2025.

This is such a relevant matter that the Federal Government launched a specific settlement program for such tax debts at the end of 2023. At that time, the Attorney General’s Office pointed out the existence of approximately 200 administrative and judicial proceedings on the subject, discussing a total amount of BRL 69 billion. For this reason, this judgment has generated a great deal of interest from Brazilian companies.

 

Brazilian Federal Revenue Service Updates Rules for the Registration of Commodity Transactions

On December 31, 2024, the Brazilian Federal Revenue Service (Receita Federal do Brasil – RFB) issued Normative Instruction RFB No. 2,246/2024, introducing significant amendments to the rules governing the Registration of Commodity Transactions (Registro de Transações com Commodities – RTC).

Initially established by Law No. 14,596/2023 within the framework of the new transfer pricing rules, the RTC was first regulated by Normative Instruction No. 2,161/2023. However, the original wording of that regulation received criticism due to its lack of detail and clarity. In response, the RFB revised the provisions, taking into account feedback obtained through a public consultation process.

Among the most relevant changes, the RTC is now mandatory for all export and import transactions involving commodities that fall under the scope of transfer pricing legislation, and not limited solely to those applying the Comparable Uncontrolled Price (CUP) method.

Furthermore, the deadline for submitting the RTC has been revised. The registration must now be filed by the 10th day of the month following the execution of the contract. For contracts executed prior to 2025, the RTC must be submitted by March 31, 2025.

Finally, the updated regulation introduces penalties for the late filing of the RTC or for the submission of information that does not comply with the prescribed requirements.

 

STJ Recognizes the Non-Remunerative Nature of Stock Option Plans

On September 11, 2024, the Superior Court of Justice (STJ) ruled that stock option plans granted by companies to their executives and other employees are of a commercial, rather than remunerative, nature for the purposes of Personal Income Tax (IRPF) assessment.

The decision, rendered under the system of repetitive appeals, has binding effect and modifies the previous interpretation adopted by the Federal Revenue Service. Until then, the tax authorities had maintained that stock options should be taxed as indirect remuneration, given their connection to the employment relationship, and thus subject to income tax withholding at the time the option was exercised.

The STJ, by majority, held that taxation should only occur upon the sale of the shares, and only when a capital gain is realized by the beneficiary. According to the Court, the granting of a stock option—even when offered at a price below market value—does not constitute immediate income or a patrimonial increase.

As a result of the decision, companies that already have stock option plans in place may restructure them to align with the new legal interpretation. Likewise, those considering the adoption of such plans may now implement them with greater legal certainty, both for the companies and for the beneficiaries involved.

On December 12, 2024, Federal Law No. 15,042/2024 was published, instituting the Brazilian Greenhouse Gas Emissions Trading System (“SBCE”), a significant milestone in the regulation of the country’s carbon market.

The SBCE will apply to activities, sources, and facilities located within Brazilian territory that emit or have the potential to emit greenhouse gases (“GHG”). Operators responsible for installations and sources emitting over 10,000 tCO_2eq/year must submit a monitoring plan and a GHG emissions and removals report to the SBCE managing body. Additionally, operators of sources emitting over 25,000 tCO_2eq/year must, beyond the obligations aforementioned, offset their emissions, within the compliance period to be determined by the managing body, and submit a periodic reconciliation report.

Primary agricultural production, as well as goods, improvements, and infrastructure directly associated with their rural properties, are not subject to the rules of this system.

In sum, the SBCE adopts an economic approach known as “cap and trade”. The SBCE managing body will allocate Brazilian Emission Allowances (“CBEs”) to regulated operators, either free of charge or for a fee, setting a maximum emissions limit for the sector (cap). Operators that reduce their emissions below the distributed CBEs can trade the surplus, while those emitting GHGs above their allocated CBEs must offset their emissions either by acquiring CBEs on the market or through Verified Emission Reduction or Removal Certificates (“CRVEs”) (trade).

Both assets – CBE and CRVE – are fungible, tradable units, representing effective reductions or removal of GHGs of 1 tCO_2eq. The difference lies in their origin: CBEs will be granted by the managing body, while CRVEs represent credits generated from projects duly registered before SBCE and following its methodologies (to be regulated).

When traded on the financial and capital markets, these assets will be classified as securities and subject to the Brazilian Securities and Exchange Commission Law (Federal Law No. 6,385/1976).

In this regard, the CVM has just published CVM Resolution no. 223, of December 16, 2024, which approves OCPC Technical Guidance 10 – Carbon Credits, Emission Permissions (allowances) and Decarbonization Credits (CBIO), with the basic requirements for recognition, measurement and disclosure of carbon credits, emission permits and decarbonization credits (CBIOs), as well as provision on associated liabilities, whether arising from legal or non-formalized obligations, as defined in the CPC 25 – Provisions, Contingent Liabilities and Contingent Assets.

For each compliance period, the National Allocation Plan will define, among other aspects, the maximum emissions cap, the number of CBEs to be allocated to operators, and the allocation method (free or for a fee).

The traceability of these assets will be ensured through the SBCE Central Registry, a digital platform that will (i) receive and consolidate information on GHG emissions and removals; (ii) ensure precise accounting of the granting, acquisition, holding, transfer, and cancellation of assets; and (iii) track national transactions involving these assets and internationally transferred mitigation outcomes.

Revenue generated from trading SBCE assets will be taxed under the Income Tax rules applicable to (i) the taxpayer’s regime, in the case of developers who initially issued these assets; (ii) net gains from transactions on stock exchanges, commodity and future markets, and organized over-the-counter markets; and (iii) capital gains in other situations.

These provisions also apply to the Social Contribution on Net Income (“CSLL”) for legal entities under the actual, presumed, or arbitrated profit regime. Revenues from the sale of assets are not subject to the Pis/Pasep or the Cofins.

Lastly, the SBCE will be implemented in five phases as follows:

 

Phase I: a 12-month period, extendable for another 12 months, for regulatory development;

Phase II: a 1-year period for operationalizing emission reporting instruments;

Phase III: a 2-year period during which operators are only required to submit a monitoring plan and an emissions and removals report;

Phase IV: implementation of the first National Allocation Plan, with free allocation of CBEs, and the launch of the SBCE asset market; and

Phase V: full implementation of the SBCE upon the conclusion of the first National Allocation Plan.

Click here to access the special teaser produced for this informative.

For further information, please contact the professionals in the Corporate Sustainability and Tax departments at GSGA.