Brazil: Provisional Measure No. 627/2013 – Increase of PIS and COFINS taxable bases
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Brazil: Provisional Measure No. 627/2013 – Increase of PIS and COFINS taxable bases



Philippe Jeffrey

Gustavo Carmona

As already reported in previous editions, Provisional Measure (MP) No. 627/2013 introduced significant changes to Brazilian tax legislation. Another such important change relates to the definition of revenue, which has a direct impact on taxpayers' PIS and COFINS liabilities. PIS and COFINS are social contributions levied on a company's gross revenue and may be calculated under a non-cumulative regime at the combined rate of 9.25% (with tax credits available) and a cumulative regime at the combined rate of 3.65% (without tax credits). In this sense, the MP broadens the definition of revenue for both regimes so as to include not only the proceeds from the sale of goods and services (as under previous rules) but also other revenues deriving from the activity or core business of the company. This new definition has a severe impact on taxpayers subject to the cumulative regime such as financial institutions. There is a discussion in the Supreme Court questioning if the spread is considered a revenue subject to PIS/COFINS, as financial revenues are generally not subject to these contributions. With the new definition including any revenue related to a company's activity or core business, such spread revenue is now subject to PIS/COFINS.

Additionally, companies under the cumulative regime must now recognise non-operational income such as the sale of fixed assets as revenue, as well as income earned through equity pick-up, the latter of which greatly impacts the activity of holding companies in Brazil which would now suffer an increased tax burden as a result.

Considering that these changes were introduced by a provisional measure of the executive branch, the Brazilian Congress has up to 120 days to approve it and convert it into law. In this regard, note that more than 500 amendments to the MP have been proposed by congressmen and senators, which will most likely result in profound changes to the final text of the law.

Tax treaty signed with Turkey now in force

On November 18 2013, the government published Federal Decree No. 8.140 which ratifies the treaty for the avoidance of double taxation signed between Brazil and Turkey on December 16 2010. Under the terms of the agreement, taxation of dividends in the source state is limited to 15% (or 10% if the beneficiary of such payments holds at least 25% of the equity of the company remitting the dividends). With regards to interest, taxation in the source state cannot exceed 15%. As for royalties, which, according to the Treaty's Protocol, also include fees for technical or administrative services, taxation of such remittances may not exceed 15% in the case of royalties for the use of trademarks and 10% in all other cases.

Also, please note that the protocol of the treaty establishes that its provisions do not preclude either party from applying its respective controlled foreign company or thin capitalisation rules.

Philippe Jeffrey ( and Gustavo Carmona (


Tel: +55 11 3674 2271


more across site & bottom lb ros

More from across our site

KPMG Netherlands’ former head of assurance also received a permanent bar and $150,000 fine; in other news, asset management firm BlackRock lost a $13.5bn UK tax appeal
The new, fully integrated office will also offer M&A, dispute resolution, IP and corporate tax services
The new guidance concerns a recent 1% excise tax on the repurchases of corporate stock for both US and certain foreign companies
Interpath has hired a managing partner from rival accounting firm BDO to lead the new operation
Survey results of over 28,000 in-house lawyers reveal that American in-house counsel place a higher value on the reputation of external advisers than their peers elsewhere
In an exclusive interview with ITR, Andrew Leigh also endorsed new legislation designed to prevent multinationals using complex corporate structures to reduce taxes
Nick Crama and Parwesh Bissumbhar, senior director and manager respectively at Alvarez & Marsal, outline practical advice for real estate managers to comply with DAC6 regulations
The finalists for the 13th annual awards revealed
Survey results of over 25,000 in-house lawyers show competitive pricing and transparency in billing practices can help firms win clients
The new tech partnership will assist clients worldwide with pillar two; in other news, UK accountancy firm MHA completes a regional merger
Gift this article