On 28 August 2018, Decree 9.482 was published, enacting
amendments to the protocol to the convention between Brazil and
Argentina to avoid double taxation and prevent tax evasion
(DTA) signed on July 21 2017.
In addition to the country-specific changes, the amendments
reflect the trend in Brazilian treaties toward the inclusion of
the OECD BEPS Action Plan, particularly relating to inserting a
preamble and introducing a limitation on benefits clause.
Some of the key aspects addressed in the amendment are:
- Inclusion of a BEPS-style preamble to
guide the way in which the DTA should be interpreted;
- Expansion of the scope of taxes covered to
comprise taxes on capital as well as income;
- Certain amendments and clarifications to
the definition of permanent establishment, including:
- Express exclusion of situations involving
a fixed installation for the sole purpose of developing an
auxiliary and preparatory activity;
- Express inclusion of the concept of a
service entity's permanent establishment.
- Inclusion of a limitation of benefits
(LoB) clause, providing that benefits are not granted in
situations where, based on all of the relevant facts and
circumstances, obtaining this benefit constituted one of the
principal objectives of the resulting operation, unless
granting the benefit would be in accordance with the
objective and purpose of the provisions. The LoB also
includes an anti-conduit clause to further reduce the
potential for abusive treaty-shopping practices;
- Inclusion of express withholding tax rate
limits for dividends, interest, and royalties;
- Removal of the previous exemptions,
including relating to dividends received in Brazil from
Argentina, and the application of a blanket tax credit system
in relation to income and capital previously subject to tax
in the other country; and
- Amendment of the existing protocol
concerning technical services and assistance within the
royalty article, including a broad definition and clarifying
how the new withholding tax limitations within the royalty
article should be applied in the context of income generated
from the use or license of software or rendering of technical
services or assistance.
For the amendments to enter into force, Brazil and Argentina
must notify each other that the local procedures to enact the
amendments have been completed. In the case of Argentina,
Congress must approve. Following the exchange of notifications,
the amendments will enter into force 30 days after the date of
the final notification and will be generally effective as of
January 1 of the subsequent calendar year or tax years
beginning on or after this date, where applicable.
Fernando Giacobbo (fernando.giacobbo@pwc.com)
PwC
Website: www.pwc.com.br