Botswana-Brazil

Dividends, interest and royalty payments to non-resident companies are exempt from withholding tax if they are paid by a BITCC (Botswana
Investment and Trade Centre company) or a tax-exempt collective investment undertaking.
9. Raised from 7.5% to 10% effective 1 April 2021.
10. Effective date: 1 January 2021 (Czech Republic); 1 July 2021 (Botswana).
B
11. Effective date: 29 February 2020 (withholding taxes); 1 April 2020 (other taxes) (Botswana): 1 July 2020 (other taxes) (Lesotho).
12. The 10% rate applies if the beneficial owner is a company which holds directly at least 25% of the capital of the dividend-paying company.
The domestic 10% rate applies in all other cases because the treaty rate (i.e. 15%) is higher than the domestic rate.
13. The 5% rate applies if the beneficial owner is a company which owns at least 25% of the capital of the dividend-paying company. 10% in all
other cases.
14. The 5% rate applies if the beneficial owner is a company (other than a partnership under the Luxembourg treaty and the Zimbabwe treaty)
which holds directly at least 25% of the capital of the dividend-paying company. 10% in all other cases.
15. The 10% domestic rate applies in all cases as the rate under the treaty (i.e. 15%) is higher than the domestic rate.
16. The 5% rate applies if the beneficial owner is a company which controls, directly or indirectly, at least 25% of the voting power in the dividend-
paying company. The domestic 10% rate applies in all other cases because the treaty rate (i.e. 12%) is higher than the domestic rate.

BRAZIL

MEMBER FIRM
City Name Contact Information
São Paulo/Rio de Cleverson Lacerda +55 11 3070 1000
Janeiro/Teresina/Ribeirão Preto +55 11 9 6746 5836
cleverson.lacerda@pkfbrazil.com.br

BASIC FACTS
Full name: Federative Republic of Brazil
Capital: Brasilia
Main languages: Portuguese
Population: 216.86 million (2023 estimate)
Monetary unit: Brazilian Real (BRL)
Internet domain: .br
Int. dialling code: +55

KEY TAX POINTS

• Corporate income tax (CIT) is charged at a set rate of 15% plus a surcharge of 10% on profits over a set level, and there is
also a social contribution tax on profits charged at a rate of 9% for legal entities in general or at 15% in case of legal entities
considered to be financial institutions, private insurance and capitalization.
• Most companies with prior year revenue below a prescribed amount can, under certain circumstances, choose to pay income
tax and social contributions calculated under the ‘presumed profit method’.
• Other federal taxes include fringe benefits tax, social security contributions (COFINS), social integration program contribution
(PIS), payroll tax including employer social security contributions (INSS), value added tax on sales and transfers of products
manufactured in or imported into Brazil (IPI), financial operations tax (IOF), and rural real estate tax (ITR).
• Municipal taxes include Services Tax (ISS or ISSQN), and estate transfer tax (ITBI) payable at a rate of up to 4% on inheritances
and donations of properties and rights, and a services tax is imposed by many cities, with rates varying substantially between
municipalities.
• Profits and gains from foreign sources are taxable in Brazil. Tax credits are available to relieve double taxation subject to a
maximum of the Brazilian tax payable on the income.
• Almost all remittances (except for dividends) to companies or persons domiciled abroad are subject to withholding tax.
• Taxes payable by individuals include personal income tax, social security tax and gift and inheritance tax.
• Brazilian resident individuals are taxable on their worldwide earnings, as well as gains on the disposal of worldwide assets and
rights.
• Personal income tax is withheld at source (at progressive rates from 7.5% to 27.5%).
• Capital gains arising other than out of financial instruments are subject to income tax at 15%. As from 2019 tax rates applicable
to capital gains are as follows:
o 15% up to BRL 5 million;
o 17.5% from BRL 5 million to BRL 10 million;
o 20% from BRL 10 million To BRL 30 million;
o 22.5% over BRL 30 million.

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A. TAXES PAYABLE

CORPORATE TAX
There are three different methods to calculate corporate income tax (CIT): the actual profit method (Lucro Real), the presumed B
method (Lucro Presumido) and the arbitrated method (Lucro Arbitrado).

ACTUAL PROFIT METHOD

The Actual Profit Method called “Lucro Real” is the method whereby the taxpayer pays CIT called “IRPJ” based on its actual taxable
income, after computing all income, gains and tax deductible costs and expenses, including net operating losses of prior years. The
taxpayer is required to maintain current and accurate accounting and tax books and records, and also corresponding supporting
documentation. Failure to maintain accurate accounting and supporting documentation may lead to disallowance of an expense
requiring it to be added back to taxable income.
In general, taxable income must be recognised monthly following the accrual basis criteria and subject to IRPJ. The tax return must
be filed annually. Corporate taxable income is taxed under a unitary system whereby a single tax rate is applied. This rate is 25%,
being 15% plus 10% on pre-tax profits over BRL 240,000 annually. Corporate income tax is generally computed on a calendar
year basis. However, payments are made monthly on estimated advance taxes. Social Contribution on Net Profit called “CSLL” is
another federal tax and is calculated on pre-tax profits. The rate is 9% computed on an annual or quarterly basis. Calculations and
payments are made monthly as estimated advance taxes. Both taxes on profits add up to 34% (25% plus 9%).

PRESUMED PROFIT METHOD

The Presumed Profit Method called “Lucro Presumido” is a simpler IRPJ calculation method that allows the taxpayer to pay income
tax and CSLL based only on its quarterly gross revenues. That means that costs and expenses are irrelevant to determine IRPJ
and CSLL liability at the end of the quarter. Due to its simplicity, Lucro Presumido is more suitable for small and medium-sized
businesses not to mention the method’s limitations and restrictions of use by large companies. Companies with prior year revenue
of up to BRL 78 million can choose, under certain circumstances, to pay income tax and social contributions under the Presumed
Profit Method, which is calculated as a percentage of the quarterly gross revenue on a cash basis.
Under Lucro Presumido IRPJ is calculated quarterly and, for most activities the presumed profit margin is 8% of monthly gross
income corresponding to sales operational activities and 32% to services revenues, and depending on the specific industry other
rates apply. Based on the presumed net income resulting from the application of the profit margins on gross income a 15% IRPJ
rate applies while net income in excess of BRL 60,000 per quarter is subject to an IRPJ surtax of 10%, similar to the “estimated”
calculation for Lucro Real.

ARBITRATED PROFIT METHOD

Lucro Arbitrado applies to only a few situations, most of them related to inaccuracy or unreliability of the taxpayer’s accounting
records (under Lucro Real). It is an extreme tool used by the tax administration to determine unilaterally and ex officio the
taxpayer’s taxable income and IRPJ due. Lucro Arbitrado has also consequences for other federal taxes, in particular CSL, PIS
and COFINS because they are determined based on the taxpayer’s accurate gross income.

FRINGE BENEFITS TAXATION

Companies participate mandatorily in different forms of social security obligations to federal agencies. These either directly or
indirectly benefit pension programs, working time compensation, social work assistance and health programs, among others. All
contributions are deductible for corporate income tax purposes.

PROGRAM FOR SOCIAL INTEGRATION CONTRIBUTION (PIS)

PIS is a federal social contribution levied on taxpayers’ monthly gross income. PIS has been subject to several changes, many
of them creating separate PIS regimes depending on the taxpayer’s business or income tax calculation method. There are two
basic PIS regimes dependent on the corporate income tax method elected by the taxpayer (Lucro Presumido or Lucro Real): the
cumulative and the non-cumulative regime.
These contributions are payable each month as a fund to employees. This is calculated based on 1.65% of monthly gross revenue.
The PIS rate is generally 1.65% of the monthly sale, in a non-cumulative way. It means, deductions are allowed in respect of
services and material costs applied in companies’ operating activities. For companies that choose to be taxed by the Presumed
Profit Method, PIS will be 0.65% of the monthly sale in a cumulative way, without the aforementioned allowed deductions.

Important Updates for 2023:

• IN (Normative Instruction) No. 2121/2022 consolidates the rules on the calculation, billing, inspection and collection of the PIS/
PASEP and COFINS. Article 26 of the Normative instruction stipulates the exclusion of the amounts related to the ICMS from
the calculation basis of PIS/PASEP and COFINS as provided in the motion for clarification of the extraordinary appeal No.
574.706.
• Provisional Measure No. 1.159 excludes ICMS from the incidence and calculation basis of PIS and COFINS credits, to be valid
as from 1 May 2023.
• In addition, IN (Normative Instruction) No. 2121/2022 establishes in article 273 that the ISS (tax on services) is not part of the
calculation basis of PIS/PASEP and COFINS when importing services.

CONTRIBUTION FOR THE FINANCING OF SOCIAL SECURITY (COFINS)

COFINS is also a federal social contribution levied on the corporate taxpayer’s monthly gross income. COFINS also has three
basic tax regimes: the cumulative, the non-cumulative (created in 2004) and the single-phase regime. The COFINS tax rate under
the cumulative regime is 3%, while the rate is 7,6% under the non-cumulative regime. Rates under the single-phase regime vary
from business to business.
Although regulated by different laws, PIS and COFINS regimes, whether cumulative or non-cumulative, are almost identical. For
cumulative COFINS the difference is basically the rate (3% for cumulative COFINS and 0.65% for cumulative PIS). Companies

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under the Lucro Presumido pay COFINS according to the cumulative regime, i.e. at the rate of 3% with no COFINS tax credit
available.

Important Updates for 2023:

• IN (Normative Instruction) No. 2121/2022 consolidates the rules on the calculation, billing, inspection and collection of the PIS/
B
PASEP and COFINS. Article 26 of the Normative instruction stipulates the exclusion of the amounts related to the ICMS from
the calculation basis of PIS/PASEP and COFINS as provided in the motion for clarification of the extraordinary appeal No.
574.706.
• Provisional Measure No. 1.159 excludes ICMS from the incidence and calculation basis of PIS and COFINS credits, to be valid
as from 1 May 2023.
• In addition, IN (Normative Instruction) No. 2121/2022 establishes in article 273 that the ISS (tax on services) is not part of the
calculation basis of PIS/PASEP and COFINS when importing services.

PAYROLL TAX
This is a monthly obligation for social security and other funds levied on payroll.

Tax Rate
Social Security (INSS) 20%
Accident Insurance (SAT) 1% to 3%
Employee Indemnity Guarantee Fund (FGTS) 8%
Education Fund (SE) 2.5%
Other 3.3%
Employees contribute monthly to the social security system at rates from 8% to 11% on a progressive-scale base salary taking into
account a maximum base salary of BRL 5,531.31. Federal law obliges companies to distribute part of their annual net income to
employees. Participation is negotiated by each company and disputes are settled by arbitration. Amounts distributed are deductible
for corporate income tax purposes and not subject to social security.
The Brazilian Government changed the criteria for companies in some business sectors to calculate the collection of INSS.
Basically, the law changed the basis for calculation of INSS from 20% under payroll salary to apply 4.5% or 2% under revenue
generated monthly by the companies which are subject to the new rules. According to Law 12.546/2011 and 13.161/2015,
companies that render IT services, technologies, and hotels will be subject to contribute 4.5% of their monthly gross revenue except
for call centres that increase to 3%. Companies that manufacture fluids for hydraulic brakes, plastic, clothing and accessories, fur,
leather, silk, wool, rugs and other coatings to floors, hats and artefacts of similar use, machinery and appliances, pressure reducing
valves, among others will be subject to contribute 2,5% of their monthly gross revenue.

LOCAL TAXES
STATE VALUE ADDED TAX (ICMS)
ICMS is a near Value Added Tax on sales of most goods and certain services. It is payable to state governments upon imports
of goods into Brazil and sales or transfers of goods within Brazil. It is also payable upon supply of electricity, the provision of
interstate and inter-municipal transport services and communication services. ICMS is levied on the sale or physical movement of
goods, freight, transportation, communications services and electric energy. Intrastate transactions are taxed at 18%, interstate
transactions are taxed at 7% or 12%, and most imports are taxed at a rate between 18% and 25%. The lower rates are normally
charged on transfers to less developed states. Some states offer rate reductions or later payment dates as a tax incentive for the
installation of factories. Communication services are taxed at a rate between 13% and 25%.
As of 1 January 2013, the ICMS rate for interstate transactions involving imported goods is at 4% (instead of the standard 7%
or 12%) subject to certain conditions. The new tax rate, established by Senate Resolution no 13/2012, aims to eliminate unfair
competition among Brazilian states to encourage customs clearance (and, thus, ICMS revenues) of imported goods even when
the goods are destined for another state.

REAL ESTATE TRANSFER TAX (ITBI)

ITBI is the municipal real estate transfer tax that applies on most onerous transfers of real estate. The tax is payable upon each and
every taxable transfer of real estate property. Rates vary according to the actual value of the relevant transaction, or the recipient
party value of property (as determined by the municipal tax administration), whichever is higher. The Constitution allows ITBI rates
to be progressive according to the value of the property. It also allows the application of different rates according to the location
and destination of the relevant property average. The ITBI rate is 2% in most municipalities.

SERVICES TAX (ISS OR ISSQN)

ISS is the municipal tax levied on the provision of services of any kind by taxpayers located within the jurisdiction of a given
municipality. ISS can also include services rendered within the boundaries of a given municipality even though the services
provider is located in another municipality.
The ISS rates vary from municipality to municipality, but rates cannot be lower than 2% and not exceed 5%. The minimum 2% tax
rate for ISS was established businesses to their jurisdictions. But some municipalities bypass this minimum 2% rate by granting
other incentives that reduce the ISS overall tax burden, such as tax base reductions. The tax applies to the taxpayer’s monthly
services gross income and is payable on a monthly basis. The ISS also applies to imported services.

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OTHER TAXES
TAX ON MANUFACTURED PRODUCTS (IPI)
IPI is a federal excise tax levied on manufactures products as they leave the plant where they have been manufactured. It also
applies to imported products at the time of importation and the first resale of the imported product by the importer. IPI is not levied
B
on exports. IPI tax rates vary depending on the products: the more essential the lower the rates. The rates are listed per tariff code
in the IPI Table called “TIPI”, which uses the Mercosur Common Tariff (NCM) as a basis.
The exports (export of manufactured products) are exempt from IPI. Imports of goods (raw material and products) are normally
taxed at the same rate as Brazilian-made products. Rates change frequently. For imported goods or products, the IPI (and other
taxes due) must be collected upon customs clearance of the goods or products.

IMPORT TAX
The import tax is a federal tax due upon customs clearance of the imported products, usually pursuant to an ad valorem tax
rate. The tax rate varies according to the tariff classification of the imported goods under the Mercosur Common Tariff (NCM), as
described above in section IPI (Tax on Manufactured Products). The tax base is the sales price shown in the commercial invoice
issued in the country of origin. However, during customs clearance procedures, the administration has discretionary powers to
reject the transaction price if there is evidence that it is not the market value. A review of the sales price is usually based on
international customs valuation rules.

FINANCIAL OPERATIONS TAX (IOF)

IOF is a federal tax that generally applies to different types of transactions such as loans and credit operations, insurance policies
and foreign exchange operations for certain services rendered. IOF regulations are extensive and change constantly. The tax is
mainly used as an instrument of economic policy to regulate the credit, currency exchange, insurance, and securities markets
rather than to generate tax revenues.

CONTRIBUTION FOR INTERVENTION IN THE ECONOMIC DOMAIN (CIDE)

The government introduced a special contribution in the year 2000. Brazilian legal entities that license, purchase or otherwise
acquire technological knowledge must pay a special contribution of 10% on activities such as: trademarks, technical services
assistance, administrative services and any royalty payments. Based on the law in force, CIDE must even be paid on activities that
do not involve the transfer of technology.

TAX ON FUEL (CIDE)

The CIDE will be paid monthly on the import and export of petroleum, derived and natural gas, and fuel alcohol. The rate will be
based on the value in Reals of the cubic meters or tons of fuel.

RURAL REAL ESTATE TAX (ITR)

Property taxation of rural and urban land receives a different tax treatment. Urban land is subject to the municipal real estate
ownership tax called IPTU and rural land is taxable by ITR. The definition of land as rural or urban is then relevant because it
determines the competent authority to levy tax on property ownership. Classification stems from exclusion: when land is considered
to be urban it will be subject to IPTU while if it is not considered to be urban it will be treated as rural for tax purposes and will
consequently be subject to ITR.
The basic rate is calculated annually based on certain premises on assessed property values and depending on the stage of use
and exploration of the property. Very small properties are exempt and the maximum rate applied corresponds to 20% of the land
value without any improvements.

B. DETERMINATION OF TAXABLE INCOME

IFRS - INTERNATIONAL FINANCIAL REPORTING STANDARDS
Brazil adopted the IASB’s International Accounting Standards in 2008 on a gradual basis and the full IFRS since 2010. As a
consequence, there are several important changes to Brazilian accounting practices, the most important of which is that these new
accounting practices are required not only in consolidated financial statements but also in the individual financial statements (Law
11638/07). These include the recognition of leasing transactions, depreciation treatment, the recognition of intangible assets, the
impairment concept etc.
Taxable income is generally computed in accordance with accounting rules and tax legislation (i.e. accounting profits adjusted
for tax purposes), subject to certain exceptions. Brazilian GAAP were adjusted in 2007 in order to be aligned with IFRS. Law
12.973/2014 of 13 May 2014 dealt with the tax effects arising from the changes to the new accounting standards (previously, a
transitory regime applied, in which legal entities could use old accounting rules for tax purposes). According to this Law, as from
2015 legal entities must observe the new accounting standards also for tax purposes (and no longer apply the transitory regime),
unless regulated otherwise by the law. In view of this, Law 12.973/2014 brought into force relevant changes to tax legislation
concerning the assessment of CIT, PIS and  COFINS, the tax treatment of dividends, interest on net equity, the equity pick-up
(método de equivalência patrimonial) and tax amortization of goodwill, among other things.

DEPRECIATION
Fixed assets shall be depreciated over their estimated useful lives for accounting purposes (IFRS). For tax purposes, the straight-
line method is usually adopted, using the following annual rates: buildings 4%; machinery and equipment 10%; vehicles 20%; IT
equipment 25% etc. Assets subject to depletion (mines, quarries, etc.) may be amortised proportionately to the units extracted in
each period.

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STOCK / INVENTORY
The cost of goods sold for production is generally valued using the weighted average cost method, although the FIFO (first in, first
out) basis may be elected. The method adopted determines the basis for the valuation of closing inventory.
B
DIVIDENDS
Brazil follows a dividend exemption system. Amounts distributed to shareholders resident in Brazil or abroad (since the investment
is registered at the Brazilian Central Bank (BCB)) are not subject to withholding tax.

INTEREST DEDUCTIONS
There is a limitation on interest expenses to be deductible:
a. Loan from non-resident companies (thin capitalisation); and,
b. Loan from abroad must be registered at Central Bank of Brazil (transfer pricing).
Interest due must be at fair market value and necessary to business activities and will be subject to withholding tax on an accrual
basis. The calculation of interest on a partner’s or shareholder’s capital (JCP) is allowed. The interest is deductible for income tax
and social contribution purposes up to the limit of the official long-term interest rate (TJLP). Profits for the current period or previous
periods must be at least double the value of the interest to be distributed. Interest is subject to a 15% withholding tax. Interest
should be paid or possibly capitalized.

Thin capitalisation
Brazil has thin capitalization rules in force since 2010 that limit the ability for corporate taxpayers under “Lucro Real” to fully deduct
interest expenses associated with loans contracted with foreign related parties or parties domiciled in low tax jurisdictions and/
or under a favourable tax regime in a foreign location. Such law states a limitation for corporate income tax purposes related to
deductible interest, accrued or paid, in favour of a foreigner not resident in a tax haven. Under the rules, interest paid to related
parties that are not located in a tax haven jurisdiction or that do not benefit from a preferential tax regime may be deducted on an
accrual basis for corporate income tax purpose only:
• If the expenses are necessary for the company’s activities; and,
• Both of the following thresholds are met:
a. The related party debt-to-equity ratio does not exceed 2:1 (calculated on the proportion of related party debt to direct equity
investment made by related parties); and,
b. The overall debt-to-equity ratio does not exceed 2:1 based on the proportion of total debt to total direct in investment made
by related parties.
If the debt payable to the non-resident investor exceeds the above ratios, then the excess portion of the interest expense payable
by the Brazilian subsidiary is not deductible for the purposes of corporate income taxes.
In addition, interest payable by a Brazilian entity to a non-resident creditor (related or not) domiciled in a low-tax jurisdiction or
benefiting from a privileged tax regime may be deducted for the purposes of corporate income taxes only if the interest expense
is necessary for the company’s activities and the amount of the Brazilian entity’s indebtedness to all entities located in low-tax
jurisdictions or benefiting from privileged tax regimes does not exceed 30% of the equity of the Brazilian borrower.
If the debt payable to the non-resident creditor exceeds the above ratios, then the excess portion of the interest expense recognized
by the Brazilian subsidiary is non-deductible.
Finally, thin capitalization rules also apply to transactions where a non-related financial institution is used as a mere intermediary
between the Brazilian company and its related party domiciled abroad. However, loan transactions entered into between two
Brazilian related residents are not subject to thin capitalization rules, even if the guarantor, attorney-in-fact or any intervening party
is a related party domiciled abroad or a resident of a low-tax jurisdiction or of a country with a privileged tax regime.

TAX LOSSES CARRIED FORWARD

Tax losses can be carried forward to offset against future profits of up to 30% of the real profits arising in each period (year). Losses
that are offset may be carried forward indefinitely. There are restrictions on losses transferred as a result of a company merger or
where there is a change in the control and activity of the loss generating company. Loss carry-back is not allowed.

INCENTIVES
Brazil offers incentives through the reduction of domestic taxes or exemption from withholding tax in the forwarding of royalties or
commissions on international financing. In addition to incentives for exports, there are incentives for the implementation of industrial
units in specific regional areas.

ROYALTIES AND TECHNICAL ASSISTANCE EXPENDITURES

Royalties are deductible expenses but are restricted to between 1% and 5% of sales revenue for companies that make cross-
border trademark and patent royalty payments. Expenditure incurred in the creation of patents and manufacturing formulas and
processes are considered capital intangible assets and are amortised over the life of the asset. This is also true for trademarks,
whereas copyright, software, and franchising are generally deductible from operational results if they are related to the activities
of the company.
Technical, scientific and administrative expenditures and royalties paid to foreign companies which have direct or indirect control
of the Brazilian company are deductible if the contracts are duly registered with the Brazilian Institute of Industrial Property (INPI)
and with the Brazilian Central Bank (BCB). There are no restrictions for the remittance of these monies abroad. However, some
remittances of funds abroad are subject to 15% withholding tax and 10% CIDE or only 25% withholding tax, depending on the case.

C. FOREIGN TAX RELIEF

Unilateral relief is granted to corporate taxpayers by means of an ordinary foreign tax credit system.

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Taxes paid abroad on income directly derived by the Brazilian resident taxpayer may be claimed as a credit against domestic
tax liability. This foreign tax credit is limited to the amount of domestic tax that is imposed on the foreign-sourced income. For
these purposes, the Brazilian tax liability includes both IRPJ and CSLL. The Brazilian tax administration holds the position that
resident entities opting for the presumed profit regime of taxation (Lucro Presumido) and directly providing services abroad are
not allowed to offset taxes paid abroad with taxes paid in Brazil. However, this exclusion does not apply if the service is provided
B
within countries with which Brazil has signed a double tax treaty where the elimination of international double taxation is agreed
upon through the use of the credit method, without restrictions connected to the taxation regimes opted by the taxpayer in Brazil.
An ordinary foreign tax credit is available in respect of the tax on profit distributions by foreign subsidiaries, if any, and the
underlying tax paid by the distributing subsidiary in the jurisdiction where the foreign entity is located.

D. CORPORATE GROUPS
For tax purposes, consolidation of affiliated companies is not allowed. Losses can only be offset against profits of the same
company. However, Law 12.973/2014 introduced a special treatment applicable until 2022 where positive and negative results
(excluding foreign exchange results) by foreign entities controlled by Brazilian legal entities may be consolidated for purposes of
application of the Brazilian CFC rules, subject to certain conditions.

E. RELATED PARTY TRANSACTIONS

Since 1997 Brazil has transfer pricing rules in place to prevent undue allocation of income in international transactions between
related parties. The system adopted is one of determining the maximum amounts of deductible expenses, and the minimum
amount of taxable income, for Brazilian companies engaged in transactions with related parties outside of Brazil or non-resident
parties domiciled in a listed low-tax jurisdiction or under a listed favourable tax regime. Domestic transactions are not subject to
transfer pricing regulations as they are governed by other anti-avoidance rules.
As opposed to other countries, where the arm’s length principle and comparable prices are the rule, the Brazilian rules take another
direction by basically establishing fixed formulas to determine the accepted transfer price. Although Brazil does not completely
ignore comparable prices or the arm’s length principle, it does limit its application by setting accepted standards for their application.
Brazil established a transfer pricing system for imports with affiliated companies of goods, services and rights acquired abroad.
The prices are based on three methods: Comparative Independent Price (PIC), Resale Price Less Profit (PRL), or Production Cost
Plus Profit (CPL) and Commodities Price Method (PCI). The same system applies to exports to non-resident related parties, with
the following methods: Export Revenues Method - PVEx, Country Destiny Price of exports revenue Method - PVA and PW, Cost
Acquisition or Manufacture plus Tax and Profit - CAP also known as Method of Price Under Quotation on Export (“PECEX”), which
is briefly defined as the average amounts of the quotation of assets or rights subject to public prices in internationally recognised
commodities and future exchanges.
Since the end of 2012, Brazil has been changing some of the methods applicable to Transfer Pricing on imports and also creating
additional methods. Basically, PRL presumed profit margin was changed from 60% to 40%, 30% and 20% depending on the
business sector in which companies operate. According to the Federal Law 12.715/2012, two new methods were established, one
applicable to imports and other applicable to exports. In accordance with the method applied, the price is defined as the average
daily amount of assets or rights subject to public prices in internationally recognised commodities and future exchanges.
The taxpayer must disclose transfer pricing methods in its annual tax return and eventually prove that the corresponding costs,
expenses and charges that exceed the elected transfer pricing method must be added back as taxable income and be subjected
to the IRPJ and CSLL.

Country-by-Country Reporting (CbCR)

Normative Instruction 1.681/2016 provides for the obligation of submitting CbCR by the ultimate holding of multinational groups
which is a resident for tax purposes in Brazil and whose economic group has generated consolidated revenue exceeding BRL 2.26
billion or EUR 750 million in the tax year prior to the tax year of the report. Through the CbCR, the Brazilian tax authorities will have
access to information aggregated by each jurisdiction in which the multinational group operates:
• consolidated revenues, segregating those obtained in transactions with related and unrelated parties;
• income or losses before income tax;
• income tax and, in the case of Brazil, also the amount of CSLL paid;
• retained earnings;
• capital stock;
• income tax due;
• number of employees, workers and other associates;
• tangible assets other than cash and cash equivalents.
In addition to this, the reporting entity shall identify each entity that is a member of the multinational group, its jurisdiction of residence
for tax purposes, the place of incorporation (only when the tax residence does not correspond to the place of incorporation) and the
nature of its main economic activities. Multinational companies that are obliged to submit CbCR must provide information from the
economic group to the Brazilian tax authorities, who will exchange this information with the other countries under the Multilateral
Agreement of Competent Authority Agreement on the Exchange of Country-by-Country Reports, which was signed on 21 October
2016.

F. WITHHOLDING TAX
Almost all remittances (except dividends) to companies or persons domiciled abroad are subject to withholding tax. Interest,
royalties and services paid to non-residents are generally subject to a 15% withholding tax unless when the beneficiary is resident
of a low-tax jurisdiction in which case the rate is 25%.

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G. EXCHANGE CONTROL
The Central Bank allows the official exchange rate to float freely within periodically established bands but participation is restricted
to authorised dealers. The bank intervenes when there are signs of speculative operations. There is an official tourist rate that
ranges normally close to the commercial rate. B
H. PERSONAL TAX
Brazilian resident individuals are taxable on their worldwide income, as well as gains on the disposal of worldwide assets and
rights. An individual is resident in Brazil if he:
• Has an habitual residence in Brazil;
• Works for a Brazilian government department or agency outside Brazil;
• Enters Brazil under a permanent visa;
• Enters Brazil under a temporary visa to work and remains in Brazil for more than 184 days within a 12-month period.
All personal income in general is subject to tax at progressive rates from 0% (monthly taxable income not exceeding BRL 1,903.98)
to 27.5% (monthly taxable income exceeding BRL 4,664.68). Payments are made monthly and a personal income tax return is filed
annually. Capital gains that do not arise from financial investments are subject to income tax at 15%.

I. TREATY AND NON-TREATY WITHHOLDING RATES

Dividends
Interest Royalties
Individuals, Qualifying companies (%) (%)
companies (%) (%)
Domestic rates
Companies 0 0 0/15/25 15/25
Individuals 0 0 0/15/25 15/25
Treaty countries:
Argentina --1 --1 --1 --1
Austria 15 15 1511 10/15/2518
Belgium 15 103 10/1511, 12 10/15/2017
Canada --1
15 4
10/15 11, 12
15/2516
Chile 15 105 15 15
China 15 15 1511 15/2516
Czech Republic 15 15 10/1511, 14 15/2516
Denmark 25 25 1511 15/2516
Ecuador 15 15 1511 15/2516
Finland 10 10 15 11
10/15/2517
France 15 15 10/1511, 12 10/15/2517
Hungary 15 15 10/15 11, 15
15/2516
India 15 15 1511 15/2516
Israel 15 105 1511 10/1516
Italy 15 15 15 11
15/2516
Japan 12.5 12.5 12.511 12.5/15/2519
Korea 15 10/156 10/1511, 12 10/15/2520
Luxembourg 25 15 4
10/15 11, 12
15/2521
Mexico 15 107 1511 10/1522
Netherlands 15 15 10/1511, 12 15/2516
Norway --1
-- 1
-- 1
15/2516
Peru 15 108 1511 15
Philippines 25 15 2
1511 15/2521
Portugal 15 109 1511 15
Russia 15 10 24
15 15
Singapore25 15 1026 10/1527 10/1528
Slovak Republic 15 15 10/15 15/2516
South Africa 15 105 1511 10/1516
Spain 15 10/15 6
10/15 11, 14
10/1523
Sweden 25 25 15/2511, 13 15/2516
Switzerland25 15 0/1029 10/1527 10/1528
Trinidad and Tobago 15 10 5
15 15

92 PKF Worldwide Tax Guide 2023/24

 Brazil-British Virgin Islands
Dividends
Interest Royalties
Individuals, Qualifying companies (%) (%)
companies (%) (%)
Turkey 15 1010 15 10/1516
B
Ukraine 15 105 1511 15
United Arab Emirates 25
15 5 30
10/15 27
15
Venezuela 15 105 1511 15
Notes:
1. There is no reduction under the treaty, the domestic rate applies.
2. The lower 15% rate applies to dividends distributed to companies, including partnerships.
3. The lower rate applies to a direct participation of at least 10% of the capital.
4. The 15% rate applies to an equity percentage of at least 10%.
5. The 10% rate applies to participations of at least 25% of capital or voting power.
6. The general treaty rate is 15%, which is reduced to 10% for participations of at least 25% of capital under the application of a most favoured
nation clause (Brazil-Israel treaty).
7. The lower 10% rate applies to participations of at least 20% of voting power.
8. The lower 10% rate applies when the beneficial owner is a company controlling directly or indirectly at least 20% of voting power.
9. The 10% rate applies to participations of at least 25% of capital held for an uninterrupted period of 2 years prior to distributing the dividends.
10. The 10% rate applies to participations of at least 25% of capital.
11. Interest paid to the government of the other contracting state, a political subdivision thereof or an agency (including a financial institution)
wholly owned by that government or political subdivision is exempt from tax.
12. The 10% rate applies to interest on certain bank loans with a minimum term of seven years.
13. The 25% rate applies if the recipient is an individual or a partnership, 15% in all other cases.
14. The 10% rate applies to interest on certain long-term (at least 10 years) bank loans.
15. The 10% rate applies to interest on certain long-term (at least 8 years) bank loans.
16. The higher rate applies to trademark royalties.
17. The general rate under the treaty is 15%. The 10% rate applies to copyright royalties (including films, etc.). The 20% rate applies to trademark
royalties (the rate was reduced from 25% to 20% by a protocol that entered into force on 1 January 2008).
18. The general rate under the treaty is 15%. The 10% rate applies to copyrights royalties (excluding films, etc.). The 25% rate applies to trademark
royalties.
19. The general rate under the treaty is 12.5%. The 15% rate applies to copyright royalties of cinematograph films, etc., and the 25% rate applies
to trademark royalties.
20. The rates under the treaty are 25% for trademark royalties and 15% for other royalties which are reduced under the application of a most
favoured nation clause: the rates for royalties are reduced to 15% for trademark royalties and to 10% for other royalties (Brazil-Israel treaty).
21. The 25% rate applies to trademark royalties and royalties for the use, or right to use, films, tapes etc. while the 15% rate applies to general
royalties.
22. The rate under the treaty is 15%, which is reduced under the application of a most favoured nation clause to 10% for any royalties other than
those from trademarks (Brazil-South Africa treaty).
23. The rate under the treaty is 10% for copyrights royalties (including films, etc.) and 15% for all other royalties which are reduced under the
application of a most favoured nation clause: the rates for all types of royalties with the exception of trademark royalties are reduced to 10%
while the rate for trademark royalties remains at 15% (Brazil-Israel treaty).
24. The 10% rate applies if the beneficial owner holds directly at least 20% of the total capital of the dividend-paying company.
25. Effective date: 1 January 2022.
26. The reduced 10% rate applies if the beneficial owner is a company (other than a partnership) which holds directly at least 25% of the capital of
the dividend-paying company throughout a 365-day period that includes the day of the payment of the dividend (for the purpose of computing
that period, no account shall be taken of changes of ownership that would directly result from a corporate reorganisation, such as a merger or
divisive reorganisation, of the company that holds the shares or that pays the dividend).
27. The 10% reduced rate applies if the beneficial owner is a bank and the loan has been granted for at least five years for the financing of the
purchase of equipment or of investment projects.
28. The 15% rate applies in case of royalties arising from the use or the right to use trademarks. The 10% rate applies in all other cases.
29. The 10% reduced rate applies if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of
the dividend-paying company throughout a 365-day period that includes the day of the payment of the dividend (for the purpose of computing
that period, no account shall be taken of changes of ownership that would directly result from a merger or divisive reorganisation, or from a
change of legal form, of the company that holds the shares or that pays the dividend). The 0% rate applies if the beneficial owner is a pension
fund (subject to conditions) or the Central Bank.
30. The 5% reduced rate applies if the beneficial owner is the UAE, any political subdivision or local government thereof or a government institution.

BRITISH VIRGIN ISLANDS

MEMBER FIRM
City Name Contact Information
Road Town Mead Malone +1 284 499 4388
mmalone@mwmglobalhld.com

93 PKF Worldwide Tax Guide 2023/24