Withholding Tax: New National Treasury Attorney’s Office report on remittances for services and technical assistance
The National Treasury Attorney’s Office recently issued a report on the withholding tax levied on remittances abroad. The report says no withholding tax is due on remittances for technical services and assistance without technology transfers if the transaction is , covered by a double taxation convention.
Historically, Brazilian tax authorities have always maintained that these remittances should be considered “Earnings not Expressly Mentioned” (article 21 of the OCDE Model Convention). Consequently, they should be taxable both in Brazil and in the country of residence.
The new report is a drastic change of position on this subject, since the National Treasury Attorney’s Office has reclassified the remittances as “Company’s Profit” (article 7º of the Model Convention), which makes them taxable only in the state of residence, with no withholding tax levied on the remittance in Brazil.
Brazilian Anti-Bribery Act in force
The Brazilian Anti-Bribery Act came into force in January., It has introduced a major change by providing for civil liability for the companies responsible for corruption or bribery, regardless the proof of fault or malice. With the new rules, federal, states and municipal authorities are authorized to open administrative proceedings to investigate suspect company’s acts of bribery or corruption of domestic or foreign government authorities, and even punish companies that try to obstruct investigations.
Among the penalties provided for, are fines that can range from 20% of the company’s gross revenue up to BRL 60 million, the registration of punished companies in public records and prohibition from participating in public bids.
New Ordinance widens Social Security Contribution on Gross Revenue taxation basis
Brazilian tax authorities recently issued Ordinance 1,435, new regulations on the Social Security Contribution on Gross Revenue (CPRB) created by Law 12,546/2011.
Under the new rule, the revenues resulting from direct exports are not to be included in the calculation basis. However, the ordinance says that revenues resulting from indirect exports (sales to trading companies) must be considered the calculation basis. This contradicts the Brazilian Constitution, which provides that revenue resulting from exports is excluded from Social Security taxation.
Changes in Temporary Admission for Economic Use
Temporary Admission for Economic Use is a special customs system in which goods intended for economic use in Brazil can be imported on a temporary admission basis. Taxes due on importation are paid proportionally to the time the good is supposed to stay in Brazil.
Decree 8,187/2014, published in January 2014, changes the Brazilian Customs Code (Decree 6,759/2009) concerning the renovation of the temporary admission for economic use concession period.
SECEX Ordinance 02/2014 – Legal Representation in Trade Defense Procedures
The Foreign Trade Secretariat (SECEX) enacted SECEX Ordinance 02/2014 in January 2014, in order to regulate legal representation of interested parties (national or foreign) in trade defense procedures regarding antidumping and compensatory measures.