BRAZIL Law and Practice Contributed by: Júlio de Oliveira, Stephanie Makin, Gabriel Lacerda and Carlos Augusto Cruz, Machado Associados
6.6 The Substance of Non-Local Affiliates Brazilian tax legislation does not provide any rules related to the substance of non-resident companies. However, Brazilian courts have already issued deci - sions stating that if the non-resident company’s sub - stance is not verified, it could be disregarded for tax purposes. 6.7 The Sale of Shares in Non-Local Affiliates Capital gains are included in the IRPJ/CSLL taxable base, similar to capital gains from local investments (see 2.7 Capital Gains ).
• action 4 – implementation of thin capitalisation rules; • action 5 – list of tax havens and privileged tax regimes; • action 6 – implementation of anti-abuse clauses in the recently signed tax treaties; • actions 8–10 – alignment of the local transfer pric - ing rules with the OECD guidelines; • action 13 – implementation of a country-by-country report; • action 14 – implementation of MAP; and • action 15 – the signing of the multilateral instru - ment at the end of 2025 (pending enactment by Congress). 9.2 Government Policy and Objectives Approach As an active member of the OECD/BEPS framework, Brazil intends to implement most of the BEPS actions. However, the government has already stated that some of the actions will not be implemented (eg, the multilateral instrument and disclosure of aggressive tax planning). In terms of Pillar Two, Brazil has already implemented a QDMTT. 9.3 International Tax International taxes have a high public profile in Brazil, as the country has already implemented CFC-like rules and aligned its transfer pricing rules with the OECD guidelines. This should have a positive influence on the implementation of BEPS recommendations. 9.4 Competitive Tax Policy Objectives The Brazilian state has shown interest in having an internationally competitive tax policy in order to attract foreign investments. However, in recent years, the main focus of the tax administration has been to maximise the country’s tax collection. This focus is in
7. Anti-Avoidance Provisions 7.1 Overarching Provisions
The Brazilian National Tax Code ( Código Tributário Nacional – CTN) provides a general anti-avoidance rule stating that Brazilian tax authorities may disregard acts and transactions carried out with the sole pur - pose of masking the occurrence of the tax-triggering event or the nature of the elements constituting the tax obligation. Although controversial, Brazilian tax authorities tend to disregard acts and transactions when they identify a lack of a valid economic purpose.
8. Audit Cycles 8.1 Regular Routine Audit Cycle
There is no regular routine audit cycle in Brazil. The only requirement related to tax audits established in Brazilian legislation is that they need to be concluded within the statute of limitations of five years. 9. BEPS 9.1 Adoption of BEPS Recommendations Brazil has already implemented the following recom - mended changes based on the OECD’s base erosion and profit shifting actions: • action 1 – taxation on remittances related to the digital economy; • action 3 – implementation of CFC rules;
line with most of the BEPS actions. 9.5 The Competitive Tax System
The Brazilian tax system is complex and provides for several different taxes and tax incentives, mainly in the indirect tax area, which have led to long-standing disputes between taxpayers and tax authorities. A tax reform aimed at simplifying the system, minimising
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