Brazil court rules on double tax conventions
21 May 2012
Sergio André Rocha, of Ernst & Young in Brazil, examines a recent decision concerning the interpretation of article 7 of Brazilian double tax conventions (DTCs).
On May 17 2012, Brazil’s Superior Court of Justice issued a decision in Appeal no. 1161467, filed by the Federal Tax Attorney’s Office, in favour of petrochemicals company COPESUL, Companhia Petroquímica do Sul.
The case involves one of the most controversial issues in Brazil’s treaty practice, the interpretation of article 7 of Brazilian DTCs.
Since 2000, Brazil’s Revenue Office has formalised its interpretation of article 7 in determining that remittances abroad in connection with the provision of services without transfer of technology are subject to withholding taxation at source. The applicable rate is 15%.
According to the Normative Declaratory Act no. 1/2000: “In DTCs signed by Brazil, this income [resulting from the provision of services without transfer of technology] is classified in the article headed Income Other Income… which shall also occur in...
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