Brazil: Brazil releases public consultation on mutual agreement procedures
The Brazilian tax authorities have released a public consultation (PC 008/2016), regulating the application of mutual agreement procedures (MAPs) in the context of the agreements for the avoidance of double taxation (DTAs) signed by Brazil.
By way of background, where a taxpayer considers that the actions of one or both of the contracting states results, or will result, in a tax liability that is not in accordance with the provisions of a DTA, the taxpayer may present their case to a Competent Authority. The Competent Authority will try to resolve the issue by mutual agreement with the Competent Authority of the other contracting state (if it is not itself able to arrive at a satisfactory solution), and ensure the transaction does not lead to double taxation.
PC 008/2016, published on August 18 2016, stated that in order to have access to a MAP, the application must include – among others – the following information:
Identification of the applicant, who should be the taxpayer;
Identification of taxes and periods involved, which should be the same covered by the DTA;
Identification of tax authorities and actions leading to taxation not in accordance with the DTA;
Identification of the direct and ultimate controller;
Supporting documentation including a copy of agreements with foreign tax authorities (such as rulings, advance pricing agreements and more); and,
Confirmation of whether the actions – leading to taxation not in accordance with the DTA – have already been submitted to the administrative or judiciary appreciation. If so, supporting documents must be included.
PC 008/2016 also stated that the request will not be processed when there is an administrative or judiciary decision. It adds that there will be no reconsideration or appeal to MAP decisions.
Finally, it should be noted that the consultation document (the memorandum) refers to the OECD's BEPS Project, specifically to Action 14, which addresses MAPs as a mechanism for the resolution of disputes between tax authorities of different states.
This initiative demonstrates that Brazil is closely following the BEPS Action Plan. Multinational enterprises with Brazilian entities should consider how this initial guidance will help them to have access to MAPs under the DTAs signed by Brazil.