International Tax 2026

BRAZIL Law and Practice Contributed by: Paulo Honório de Castro Júnior and Bruno Marques Feitosa, William Freire - Advogados Associados

1. Sources and Principles 1.1 Domestic Sources of International Tax Law Brazil’s international tax law is grounded in its Federal Constitution, which allocates taxing powers among the Union, states, municipalities and the federal dis - trict, and establishes fundamental principles such as legality, equality, ability to pay and legal certainty. Only the Federal Union has competence to enter into international treaties and to legislate on income taxa - tion, which centralises Brazil’s treaty policy at the fed - eral level. The National Tax Code ( Código Tributário Nacional – CTN) provides general rules applicable to all taxes, including provisions governing the interpretation of tax law and the interaction between domestic law and treaties. Federal statutes regulate core international tax matters, including transfer pricing, controlled for - eign companies (CFCs), thin capitalisation and with - holding taxation on cross-border payments. Administrative guidance is issued primarily by the Federal Revenue Service ( Receita Federal do Brasil – RFB) through normative instructions, rulings and binding consultation responses. While not legislation, such guidance plays a significant role in shaping com - pliance and audit practice. Judicial Interpretation Brazil does not follow a strict system of binding prec - edent, but decisions of the Superior Court of Justice ( Superior Tribunal de Justiça – STJ) and the Supreme Federal Court ( Supremo Tribunal Federal –STF) strong - ly influence tax interpretation. The STJ is particularly relevant in treaty matters, including the interpreta - tion of permanent establishment (PE) clauses and the compatibility of CFC rules with treaty provisions. Decisions rendered under the “repetitive appeals” or “general repercussion” systems have binding effects on lower courts and administrative authorities. Administrative case law issued by the Administrative Council of Tax Appeals ( Conselho Administrativo de Recursos Fiscais – CARF) also plays a practical role in

interpreting international tax rules, especially in trans - fer pricing and cross-border structuring disputes. Treaty Network: Scope and Structure Brazil maintains 37 income tax treaties currently in force. The network is geographically diversified, cov - ering Europe, Latin America, Asia and the Middle East. A treaty with the United Kingdom has been signed and ratified by the UK but is pending approval by the Brazilian Congress. Brazil’s treaties generally follow a bilateral structure based on the OECD Model, while incorporating ele - ments of the UN Model that preserve broader source- state taxation. Most treaties cover income and capital, include provisions on residence, PE, withholding tax limitations and mutual agreement procedures (MAPs), and increasingly reflect base erosion and profit shift - ing (BEPS) minimum standards. Brazil has signed the Multilateral Instrument (MLI) but has not yet completed ratification, so treaty modifica - tions remain dependent on bilateral processes. 1.2 Hierarchy of Sources In Brazil, the relationship between domestic and inter - national sources of tax law is governed by constitu - tional principles and statutory rules, particularly the CTN. International tax treaties are incorporated into domes - tic law following congressional approval and presi - dential ratification. Once internalised by decree, they become part of the Brazilian legal system. Pursuant to Article 98 of the CTN, treaties prevail over conflict - ing domestic tax legislation and must be observed by subsequent laws. Courts interpret this not as a formal repeal of domestic provisions, but as a suspension of their effects to the extent they conflict with treaty obligations. The Superior Court of Justice has consist - ently upheld this approach in tax matters. Treaties, however, remain hierarchically subordinate to the Federal Constitution. They cannot override con - stitutional provisions, including rules allocating taxing powers among federal, state and municipal authori - ties.

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