All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

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

Sponsored by

money-charity-beggar 320 x 215

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 (



more across site & bottom lb ros

More from across our site

The Biden administration is about to give $80 billion to the Internal Revenue Service to enhance the tax authority’s enforcement processes and IT systems.
Audi, Porsche, and Kia say their US clients will face higher prices under the Inflation Reduction Act after the legislation axes an important tax credit for electric vehicle production.
This week Brazil’s former President Luiz Inacio Lula da Silva came out in support of uniting Brazil’s consumption taxes into one VAT regime, while the US Senate approved a corporate minimum tax rate.
The Dutch TP decree marks a turn in the Netherlands as the country aligns its tax policies with OECD standards over claims it is a tax haven.
Gorka Echevarria talks to reporter Siqalane Taho about how inflation, e-invoicing and technology are affecting the laser printing firm in a post-COVID world.
Tax directors have called on companies to better secure their data as they generate ever-increasing amounts of information due to greater government scrutiny.
Incoming amendments to the treaty could increase costs on non-resident Indian service providers.
Experts say the proposed minimum tax does not align with the OECD’s pillar two regime and risks other countries pulling out.
The Malawian government has targeted US gemstone miner Columbia Gem House, while Amgen has successfully consolidated two separate tax disputes with the Internal Revenue Service.
ITR's latest quarterly PDF is now live, leading on the rise of tax technology.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree