On June 25, 2019, the Federal Decree No. 9,851 was finally published, and the Amendment to the treaty came into force.
One of the changes proposed by the Amendment is the revocation of paragraphs 5 and 6 of article 23. These paragraphs deal with the methods to avoid double taxation of specific income, and its revocation leaves room for taxation of undistributed profits of corporations, and taxation of shares issued in the Denmark, received for example as a result of a capital increase, or the capital gain arising from the sale of these shares.
The following changes are also highlighted: (i) inclusion of exempt income in the Brazilian income tax base for the purposes of the treaty; (ii) inclusion of a “national treatment” clause with respect to dividends (preventing the dividend received by residents of Denmark from being taxed at source in Brazil); and (iii) removal of the 25% Brazilian tax offset limitation, as provided for in the previous version of the treaty.
It is noteworthy that the Amendment signed in 2011 does not follow the OECD’s minimum standards. As Brazil has recently adapted its treaties to the recommendations of the BEPS Project, it is possible that the Treaty will have further amendments.
The Tax Consultancy team of Rolim, Viotti & Leite Campos will keep monitoring the adaptation process of Brazil to the OECD minimum standards, and is available for further clarifications on this matter.
Related attorneys: Frederico de Almeida Fonseca