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Brazil: Tax authorities say French not-for-profit organisations subject to tax

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Brazilian tax authorities have said that no relief should be granted for withholding tax on payment to foreign not-for-profit organisations under the Brazil-France double tax agreement (DTA).

The Federal Brazilian tax authorities (RFB) published Solução de Consulta – Cosit 184/2018 (dated September 28 2018) on October 2 2018, providing that a remittances abroad to a French not-for-profit organisation should be subject to income withholding tax at a rate of 15%.

The opinion contemplated the application of the DTA between Brazil and France, specifically in relation to a payment made by a Brazilian resident taxpayer to a foreign not-for-profit organisation located in France.

The opinion considered and concluded that the membership fee paid to the French not-for-profit organisation should not be classified within one of the specific income items contemplated by the DTA, such as dividends (Article 10), interest (Article 11), royalties (Article 12), etc. It subsequently considered whether relief was available under the ‘business profits’ or ‘lucro da empresa’ provisions under Article 7 of the DTA.

Following the commentary of the United Nations model double tax convention between developed and developing countries, the RFB turned to the domestic Brazilian law to determine whether the payment should be classified within the meaning of the article. Having regard to the Brazilian domestic law and citing commentary from respected international tax scholars, the RFB focused on the not-for-profit nature of the recipient organisation, concluding that an activity undertaken without a profit objective cannot be considered a business and consequently should not be entitled to relief under Article 7 of the DTA.

The opinion noted that unlike certain other Brazilian tax treaties, the DTA with France does not contain an article that allocates taxation rights for ‘other income’. In the absence of this, both countries have the right to tax in accordance with their domestic laws. In applying the domestic law, the RFB confirmed that the exemptions available to Brazilian not-for-profit organisations should not apply to their counterparts located abroad and therefore the general rules related to income withholding tax should apply to the transaction.

Finally, the RFB highlighted that the responsibility for withholding lies with the Brazilian entity making the payment. Where this entity assumes the onus of income tax liability, the total value of the amount due to the beneficiary abroad should be grossed-up to account for the relevant income withholding tax.

While a Solução de Consulta does not represent law or a legal precedent, it does provide further support and guidance for Brazilian entities in relation to how the RFB are treating such arrangements.


Fernando Giacobbo

Mark Conomy

Fernando Giacobbo ( and Mark Conomy (



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