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Brazil: Obligation to file CbC report when there is no effective competent authority agreement in place for its automatic exchange clarified; Double tax treaty with Russia now in force

Fernando GiacobboRuben Gottberg

Obligation to file CbC report when there is no effective competent authority agreement in place for its automatic exchange clarified

On July 27 2017, the Brazilian tax authorities published Normative Instruction 1.722/2017, clarifying that Brazilian affiliates of non-Brazilian multinational enterprises may be required to file the country-by-country report (CbCR) in Brazil, in relation to the fiscal year 2016, even if a CbCR has been filed by either the ultimate parent entity (UPE) or a surrogate entity (SE) in another jurisdiction.

According to Normative Instruction RFB 1681/2016, a Brazilian affiliate of a non-Brazilian multinational enterprise (MNE) meeting certain revenue thresholds is required to file, with its 2016 Brazilian income tax return, a 2016 CbCR for the entire MNE, if:

1) UPE of the MNE is not obliged to file a CbCR in its jurisdiction of residence for tax purposes;

2) An eligible SE is not appointed;

3) There is an agreement in place for the exchange of tax-related information between Brazil and the jurisdiction where the MNE' s 2016 CbCR is to be filed, but the competent authority agreement (CAA) authorising its automatic exchange is not in place; or

4) A systemic failure has occurred.

To ensure that automatic exchange of information takes place (as in item 3 above), Brazil signed the Multilateral Convention on Mutual Administrative Assistance (MCMAA), which has been in force for Brazil since October 2016, and in effect for fiscal years starting as of January 1 2017. Under the framework of the MCMAA, Brazil signed a Multilateral Competent Authority Agreement (MCAA), allowing tax authorities to automatically exchange the CbCR.

Although the MCAA for the exchange of the CbCR is only effective for fiscal years starting as of January 1 2017, and the Brazilian legislation requires an effective MCAA as of January 1 2016, Brazil will accept that Brazilian affiliates of non-Brazilian MNEs appoint their UPE as the filing entity for the CbCR (for fiscal year 2016), provided all the other conditions in the legislation are satisfied.

Note, however, that such Brazilian affiliates may be required, in the future, to file a CbCR in Brazil within 60 days if:

  • Before December 31 2017, the UPE's jurisdiction of residence, for tax purposes, has not taken actions to retroactively introduce an automatic exchange of CbCR with Brazil for the fiscal year 2016; and
  • Such jurisdiction requires local affiliates of Brazilian MNEs to file a CbCR for the fiscal year 2016 due to the MCAA not being in place.

Multinationals are encouraged to monitor the development of this situation as it may result in the need to file CbCR in more than one jurisdiction.

Double tax treaty with Russia now in force

On August 1 2017, the executive branch of the Brazilian government promulgated Decree No. 9.115/2017, which converts into internal legislation the convention to avoid double taxation (DTT) between Brazil and Russia, signed on November 22 2004 and ratified by the Brazilian Senate on May 25 2017.

As it has become usual in Brazilian DTT practice, the DTT between Brazil and Russia treats technical services and technical assistance as royalties. Further, it does not restrict the application of thin capitalisation and controlled foreign corporation rules.

In contrast with other DTTs signed by Brazil, remittances of interest on net equity are expressly regarded as interest, leaving no room for potential discussions on their characterisation for DTT purposes.

Finally, the DTT between Brazil and Russia includes a provision on limitation of benefits (LoB), aimed at preventing treaty abuse.

Moving forward, the DTT is expected to apply to tax years starting as of January 1 2018 as the final note for its entry into force was exchanged on June 16 2017.

Fernando Giacobbo ( and Ruben Gottberg (

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