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Brazilian rules on country-by-country reporting

Brazilian rules on CbCR

In line with the commitments agreed by Brazil under the BEPS Project, the Brazilian Federal Revenue Service introduced a new statutory requirement for certain Brazilian-based entities, which are part of multinational enterprise (MNE) groups to submit an annual country-by-country (CbC) report, containing information regarding their profits, taxes and other indicators of economic activities.


The OECD, together with the G20, is coordinating the BEPS Project, which focuses primarily on studying and recommending global mechanisms against tax avoidance strategies that exploit loopholes, gaps, frictions and mismatches in tax rules in order to artificially shift profits to low- or no-tax jurisdictions. In this regard, the OECD/G20 developed 15 Action Points on BEPS, targeting weaknesses in tax rules and providing governments with (domestic and international) recommendations of consensus-based mechanisms to better align taxing powers with economic substance.

Among these actions is Action 13, which created a template for MNEs to report information related to their amount of revenue, profits, taxes paid and accrued, number of employees, stated capital, retained earnings and tangible assets, for each tax jurisdiction in which they do business, which are all relevant for accomplishing the BEPS Project’s goals. Accordingly, the OECD’s executive summary on Action 13 declares the need for the development of rules that require MNE to provide all relevant governments with essential information on their global allocation of income, economic activity and taxes paid among countries, in a common and standardized template.

This template is the so-called CbC report, which was implemented by Brazil by means of Normative Instruction (NI) No. 1,681, of December 28 2016, issued by the Brazilian Federal Revenue Service, and freely translated into Portuguese as Declaração País-a-País.

The language of the NI mainly observes the OECD’s model legislation for CbC reporting, introducing adaptations aimed at accommodating the proposed model with Brazilian tax rules and regime. 

Overview of the main domestic rules for CbC reporting stipulated by NI 1,681


The annual filing of the CbC report is mandatory to any entity resident in Brazil for tax purposes, which:

A.    Qualifies as ultimate parent entity (UPE) of an MNE group; or

B.    Does not qualify as the UPE of an MNE group, but:

(i)           the UPE of the MNE group is not obligated to file a CbC report in its jurisdiction of tax residence;

(ii)          the jurisdiction in which the UPE is a resident for tax purposes has a valid international agreement to which Brazil is a party but does not have a qualifying competent authority agreement in effect requiring the filing of the CbC report for the reporting fiscal year; or

(iii)         there has been a “systemic failure” of the jurisdiction of tax residence of the UPE and Brazilian authorities have notified the entity resident for tax purposes in Brazil of such “systemic failure”.

In case there is more than one entity of the same MNE group that is a resident for tax purposes of Brazil and one or more of the conditions set out in subsections (i) to (iii) apply, the MNE group may elect one of such entities to file the CbC report.

Taxpayers should note that CbC report filing is required only for entities that are part of an MNE group, are resident for tax purposes of Brazil, and earned a total consolidated group revenue in the fiscal year prior to that of the CbC report filing (as reflected in the consolidated financial statements of the UPE) greater than BRL 2.26 billion ($720 million) if the UPE is resident of Brazil for tax purposes; or €750 million ($816 million), or equivalent in domestic currency, if the UPE is resident for tax purposes of another country.

Entities obliged to submit a CbC report must provide the tax authorities with:

(i)           aggregated information for each jurisdiction in which the MNE group operates relating to: (a) the total amount of revenue and the revenues obtained from related and unrelated parties; (b) the amount of profit or loss; (c) the amount of income tax paid and the amount of income tax due; (d) the amount of capital stock and retained earnings; (e) the number of employees; and (f) the amount of tangible assets other than cash and cash equivalents;

(ii)          identification of all entities that are part of the MNE group, namely: (a) its tax jurisdiction and, if different, the tax jurisdiction under which that entity was established; and (b) the nature of its main economic activities; and

(iii)         additional information, as the case may be, to be voluntarily disclosed for additional clarification purposes, at the MNE group’s discretion.

The CbC report must be submitted annually with information of the immediately preceding fiscal year, through the filing of the Digital Tax-Accounting Bookkeeping (the so-called Escrituração Contábil Fiscal – ECF). The first CbC report will concern information relating to fiscal-year 2016, which must be filed in 2017 within the time limit for submitting the ECF (i.e. last business day of July).

Please note that any Brazilian entity that is part of an MNE group (regardless of its obligation to submit the CbC report) must inform in the ECF if it is the UPE of a MNE group, or if it is a surrogate parent entity. If it is not the UPE or a surrogate entity, the Brazilian entity must inform the identification and tax jurisdiction of the entity of the MNE group that will submit the report.


Seeking to encourage timely filing of the report by MNE and to take appropriate actions to file the required information, the NI established the following penalties in case of failure to comply with reporting obligation:


·         for untimely submission: BRL 500 to BRL 1,500 per calendar month or fraction of month depending on certain characteristics of the entity, such as whether it is commencing its activities or subject to special regime for calculating its corporate income taxes;

·         for failure to comply with notice by tax authorities requesting compliance with obligations established by the NI or failure to provide clarification within the deadline imposed by the relevant tax authority: BRL 500 per calendar month; and

·         for inaccurate, incomplete or omitted information: 3% (but not less than BRL 100) of the amount of information omitted, inaccurate or incomplete.

Final remarks

Tax avoidance and evasion has long been a paramount concern in Brazil; in fact, Brazil has been enacting strict rules and improving its current rules regarding controlled foreign corporation, transfer pricing and thin capitalisation, seeking to stop or reduce base erosion and profit shifting.

Brazil, as a G20 member, has been engaged in the BEPS Project and keen to implement some of the Project’s most relevant recommendations and strengthen BEPS’s international standards. To date, Brazil has implemented certain recommendations provided in Action 5 (Harmful Tax Practices) and Action 14 (Dispute Resolution), in addition to Action 13 (CbC reporting).

CbC reporting seeks to show tax authorities a global picture of the activities of MNE groups, which may equip them with useful information to assess high-level transfer pricing issues and other relevant BEPS-related risks. The information reported by MNEs may be shared with other relevant tax jurisdictions to provide them with relevant material for identifying cases where MNEs have structured certain forms of base erosion or profit shifting.

This article was prepared by Leonardo Homsy and Isaque Brasil, partner and associate with law firm Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados.

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