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Brazil Outlines Process for Asking International Tax Questions


Added on 24/02/2017

Brazil’s federal revenue service is continuing to adapt the country’s tax rules to OECD recommendations, as shown in recent guidance on how companies should seek help from the government on international tax questions, reports Bloomberg.

Normative Instruction 1689, issued Feb. 21, spells out the requirements for companies to request a consultation on international taxation questions including those dealing with transfer pricing, a Brazilian program providing tax incentives for the electronics industry and the opening of foreign offices.

From now on, companies requesting clarifications on these issues will need to provide specific information regarding their operations, the Feb. 21 guidance said.

“It will be necessary for the company to identify its direct and final controller, the country of residence of its headquarters, the country of its permanent establishment and all of the related areas with which the company conducts the operations that are the object of its consultation,” attorney Geraldo Valentim of MVA Advogados told Bloomberg BNA in a Feb. 22 e-mail.

Adherence to BEPS Recommendations

The revenue service said in a statement that the new norm is part of Brazil’s adherence to the Organization for Economic Cooperation and Development’s recommended requirements for exchanging information with other countries’ revenue services on the international operations of companies—recommendations developed under its Action Plan on Base Erosion and Profit Shifting, the organization’s two-year project to combat tax avoidance by multinational companies.

Valentim added that following the BEPS guidelines will also give Brazilian authorities a “greater cross referencing of information for internal tax monitoring purposes.”

Attorney Alexandre Siciliano of the firm Lobo & De Risso Advogados pointed out that the new norm is the second one dealing with BEPS to be released in the last two months. At the end of December, the revenue service issued its new country-by-country report format, another BEPS requirement that Brazil agreed to adopt in 2015.

Global Tax, Profit Reporting

The format requires companies to present a wide range of information regarding their overall operations, concentrating on revenue and taxes. It will be shared with other nations “where entities of the multinational group are present through agreements on the automatic exchange of tax information,” according to the tax department. Siciliano told Bloomberg BNA that he expects “many other norms” dealing with BEPS to be released.

Other aspects of the OECD’s BEPS project deal with ensuring that interest deductions are linked to a level of economic activity and changes to the permanent establishment definition that will address companies’ strategies to avoid having a taxable presence in a country.

Over the past year, Brazil has taken major strides towards the closing of loopholes that have allowed companies and individuals to hide undeclared income abroad. In June, the country completed its formal adherence to the Convention on Mutual Administrative Assistance in Tax Matters, which permits Brazilian tax officials to share information on bank accounts, income, investments and other tax related issues with over 90 countries that have already adhered to the convention.

This followed the country’s adherence in 2015 to the U.S. Foreign Account Tax Compliance Act for the exchange of tax information.