On November 29, 2022, Brazil and the United Kingdom signed an agreement to avoid double taxation on income and prevent tax evasion. In addition, the treaty aims to expand bilateral trade and investment flows.
The signed agreement adopts the general outline of the DTAs (Double Taxation Agreements), with similar terms to the agreements signed between Brazil and Singapore, Switzerland and the United Arab Emirates, for example. It is aligned with the tax policies of the OECD and the BEPS project, which seeks to combat the erosion of the tax base and profit shifting, thus contributing to make Brazil a member of the organization. Currently, the agreement signed is facing ratification througt Congress aproval by Decree.
The agreement’s Article 13th, which sets the rules for “Technical Services Income”, deserves a special mention. It states that when such services are provided to a beneficiary, which resides in Brazil or in the United Kingdom, the tax cannot exceed (i) 8% of the gross remuneration, during the first two years; (ii) 4% of the gross remuneration, between the third and fourth years; (iii) 0% of the gross remuneration, after the fourth year.
This provision will produce effects upon agreements Brazil has previously signed, as long as they adopt a “most favored nation clause” (MFN), such as the agreement signed with Switzerland (Decree n. 10,714/21). This is because such agreement provides that if Brazil adopts, in an agreement with any other country that is a member of the OECD, lower rates (including exemption) to the remuneration for technical services, these rates will also apply to the Brazil-Switzerland Convention.
The tax team of Rolim, Viotti, Goulart, Cardoso Advogados is available for any clarifications related to the subject.
Related Attorneys: Luís Felipe de Campos, Roberto Junqueira de Alvarenga Neto, Gabriel de Sá Balbi Cerviño, Wendell Ferreira dos Santos.
Related attorneys: Luis Felipe de Campos / Roberto Junqueira de Alvarenga Neto / Gabriel de Sá Balbi Cervino /
