Businesses generally adopt a corporate form in order to perform their economic activities in Brazil. The main corporate forms used by businesses are corporations (sociedade anônima) and limited liability companies (limitada).

Sociedade Anônima

As a rule, a sociedade anônima must have at least two shareholders, which can be individuals or legal entities, residents or non-residents. However, the Brazilian Corporations Law establishes that, exceptionally, a sociedade anônima can be (i) incorporated as a wholly owned subsidiary, by public deed, as long as the sole shareholder of the corporation is a Brazilian company; or (ii) converted into a wholly owned subsidiary as a consequence of the acquisition of its shares by a Brazilian company or merger of its shares into a Brazilian company.

There is no minimum capital requirement, and the liability of shareholders is limited to the price of the shares subscribed or acquired by them.

A sociedade anônima can be publicly held if the securities issued are admitted for trade in capital markets, or closely held if the securities issued are not admitted for trade in capital markets.

Limitada

There is no minimum number of partners required to incorporate a limitada. As such, it is possible to incorporate a limitada with only one partner (limitada unipessoal). There is also no minimum capital requirement, and the liability of the quotaholders is limited to the amount of their respective quotas, but all quotaholders are jointly liable for the paying up of any unpaid portion of the quota capital. Limitadas cannot be publicly held.

Brazilian legislation also allows foreign companies to incorporate branches in Brazil and establishes that such a branch shall be treated as a Brazilian legal entity for tax purposes. The tax deductibility of expenses not associated with the activities of the branch in Brazil is accordingly restricted.

The establishment of a foreign company’s branch depends on a special permit granted by the federal government of Brazil, and any amendment to the company by-laws or its articles of association requires the approval of the federal government in order to be valid in Brazil. In view of this, it is not common for foreign companies to incorporate branches in Brazil.

The most commonly used transparent entities in Brazil are consortiums and investment funds.

Consortiums

Commonly used to explore public concessions, a consortium is an association set up by two or more companies for a predetermined amount of time to carry out a specific project or undertaking. The member companies of a consortium are liable for their obligations as established in the consortium agreement, which must be registered in the Commercial Registry. As a rule, there is no joint responsibility between the member companies of a consortium, unless required in specific legislation.

Revenues, costs and expenses registered by the consortium shall be shared according to the provisions of the consortium agreement, and the member companies must include such revenues, costs and expenses in their own results according to their percentage of ownership in the consortium.

Investment Funds

As transparent entities, the income generated by investment funds is taxed at the level of the investors, and the fund manager is liable for withholding the income tax due. The taxation of the investors in investment funds will vary according to the type of fund, the tax residency of the investor, and the area of investment and the length of the investment (ie, long-term or short-term).

To determine the residence of a legal entity for tax purposes, Brazilian tax legislation takes into consideration only the place of incorporation of the legal entity, meaning that any kind of legal entity that is incorporated in Brazil will be considered as a Brazilian resident and taxed as such, regardless of its place of effective management.

Businesses in Brazil, even if they are owned directly by individuals, are subject to corporate income tax (imposto sobre a renda das pessoas jurídicas – IRPJ) at a rate of 15%. A surcharge of 10% is applicable for taxable income exceeding BRL240,000 per year (approximately USD45,000).

In addition to the IRPJ, a social contribution on net profit (Contribuição Social sobre o Lucro Líquido – CSLL) is also due by Brazilian companies at a rate of 9%, except for financial entities, which are currently subject to 15% or 20% rates depending on the financial activity performed.

In the context of the implementation of Pillar 2 rules in Brazil, an additional contribution to the CSLL has been created, in force as of 2025, to meet the requirements of a qualified domestic top-up tax (QDMTT). Although still referred to as CSLL, the characteristics of the additional CSLL are quite different from those of the ordinary CSLL.

In line with Pillar 2 rules, the additional CSLL may be due by companies that are part of a multinational group and have generated annual revenues of EUR750,000,000 or more, reflected in the consolidated financial statements of the ultimate parent entity (UPE) in at least two of the four fiscal years immediately preceding the year under analysis.

Brazil legal entities may be subject to the calculation of IRPJ and CSLL based on two main regimes: actual profit or deemed profit.

Actual Profit System

Under the actual profit system, the taxable income corresponds to the accounting profit accrued by the company, adjusted in accordance with the additions and exclusions set forth by tax legislation, minus the offsetting of accumulated tax losses from previous years (limited to 30% of the adjusted profit). The main tax adjustments are:

• permanent additions – eg, non-deductible expenses, profits earned abroad and losses resulting from the equity pick-up method of accounting;
• permanent deductions – eg, profits resulting from the equity pick-up method of accounting, interest on net equity and tax benefits;
• temporary additions – eg, provisions; and
• temporary deductions – eg, differences in depreciation between tax and accounting criteria.

Deemed Profit System

The deemed profit system may apply to companies with yearly revenues of up to BRL78 million (approximately USD15 million) or companies that are not mandatorily subject to the actual profit system. Under the deemed profit regime, the taxable basis corresponds to deemed percentages of the gross revenues of the company (such percentages vary from 1.6% to 32% depending on the activities of the company) plus other taxable revenues, without any deductions for costs and expenses or tax losses carried forward. Accrual or cash basis may apply.

Starting from 2026, the deemed percentages applicable to gross revenues up to BRL5 million (approximately USD 930 thousand) per year will increase by 10% (thereby varying from 1.76% to 35.2%).

Lei do Bem

A special incentive for technological innovation (lei do bem) is applicable to legal entities that carry out research on new products and manufacturing processes, and make improvements in the quality, productivity and competitiveness of existing products and manufacturing processes. This technological innovation incentive provides the following benefits.

• IRPJ and CSLL benefits include:
1. deduction of expenses related to technological innovation R&D;
2. additional exclusion from the IRPJ and CSLL taxable basis equal to percentages varying from 60% to 100% of expenses related to technological innovation R&D (conditions must be met);
3. full depreciation in the year of acquisition of new assets used in technological innovation R&D; and
4. accelerated amortisation of costs with the acquisition of intangibles linked to technological innovation R&D.
• Other benefits include:

1. 0% withholding tax (WHT) on payments or credits to non-residents for the registration and maintenance of trade marks, patents and cultivars abroad;
2. 45% reduction in the excise tax (Imposto sobre Produtos Industrializados – IPI) levied on the purchase of assets destined for technological R&D – this incentive was reduced by Supplementary Law 224/2025; and
3. government subvention of up to 60% of the value of the remuneration of researchers holding master’s or PhD degrees.

Companies in the automotive sector that invest in R&D or in the production of technology in the country may benefit from financial credits corresponding to 50% of the amounts disbursed with these R&D investments, limited to 5% of the total gross revenue from the sale of goods and services in the second calendar month prior to the month in which the credit is calculated. Such financial credits will be granted in the form of CSLL credits (90% as of January 2026 due to Supplementary Law 224/25) that may be offset against federal taxes due by the companies or be refunded in cash.

Brazilian tax legislation provides for IRPJ incentives in order to promote the development of certain regions’ economic sectors.

Incentives for Regional Development

Companies in the North and North East of Brazil may benefit from a 75% IRPJ reduction if their activities are considered as a priority (such activities are defined by Presidential Decrees). In general terms, taxpayers may benefit from this reduction for a ten-year period provided they apply and have their projects approved before 31 December 2028. The benefit shall be approved by the Brazilian Federal Revenue Service based on a prior technical analysis of the regional superintendencies – Superintendência do Desenvolvimento da Amazônia (SUDAM) and Superintendência do Desenvolvimento do Nordeste (SUDENE).

The IRPJ reduction only applies to profits directly related to certain encouraged economic activities (eg, infrastructure related to energy, telecommunications, transportation, pipeline installation, gas production, water supply and sanitation services projects; tourism; manufacturing in several areas, including machinery and equipment, food and beverages, and pharmaceuticals; electro-electronic, mechatronics, information technology and biotechnology; and the component industry). Projects approved as of January 2026 shall be subject to a 67.5% IRPJ reduction, as provided for in Supplementary Law 224/2025, which reduces tax benefits.

Oil and Gas Sector Incentives

Companies that act in the oil and gas sector in Brazil may fully deduct from the IRPJ and CSLL taxable basis expenses and depreciation/exhaustion charges related to the exploitation of oil and gas. In some situations, an exemption of withholding income tax may apply.

Agricultural Sector Incentives

Companies that act in the agricultural sector in Brazil are allowed to fully offset their tax losses carried forward, without the need to comply with the 30% limitation mentioned in 2.4 Basic Rules on Loss Relief, as well as to benefit from accelerated depreciation of goods acquired for use in agricultural activities for IRPJ/CSLL purposes.

Incentives for the Modernisation of Equipment

To encourage the modernisation of machinery and equipment used by Brazilian companies in their production processes, new goods destined for the fixed assets of companies in specific economic sectors may be subject to accelerated depreciation.

Companies in the economic sectors in question will be able to consider depreciation of:

• up to 50% of the value of the asset in the year in which the asset is installed, or put into service or a condition to produce; or
• up to 50% of the value of the asset in the year following that in which the asset is installed, or put into service or a position to produce.

The sectors, machinery and equipment that can benefit are defined by administrative regulations.

Under the actual profit regime, tax losses can be carried forward without any statute of limitations, provided that the offsetting does not exceed 30% of the taxable basis of any given period. The exception is companies under judicial restructuring, which can offset the full amount of tax losses. No carry-back is allowed. Non-operating tax losses may be offset only against non-operating profits.

A restriction to the offsetting of tax losses is imposed where there is a change (i) of control and (ii) in the business activities pursued by a Brazilian company. Accordingly, a company cannot offset its tax losses if, from the date of the accrual of such losses to the date of their offsetting, a change in the control of the company and in the company’s business activities has occurred concurrently.

In the case of a spin-off, the company forfeits tax losses proportionally to the value of the spun-off part of its net worth. In the case of a merger, the merged company’s tax losses cannot be offset against the profits of the surviving company.

The general rule for the deduction of interest paid by local corporations is that the interest paid will only be considered deductible for tax purposes if it can be demonstrated that the loan to which the interest is related was necessary for the maintenance of the company’s activity.

In addition to the general rule, the deduction of interest derived from loans with related parties and/or parties resident in tax havens, or subject to privileged tax regimes, is subject to compliance with thin capitalisation and transfer pricing rules.

Regarding the thin capitalisation rules:

• if the creditor is a related party, the total debt amount shall not exceed twice the value of the equity stake held by the related party in the Brazilian company’s net worth;
• if there is more than one creditor that is a related party, the total debt amount shall not exceed twice the value of the equity stake of all the related parties abroad in the Brazilian company’s net worth; or
• if the creditor (related party or not) is located in a tax haven or subject to a privileged tax regime, the total debt amount shall not exceed 30% of the Brazilian company’s net worth.

Regarding the transfer pricing rules, as of 2024, the interest rate of the loan must comply with the arm’s length principle.

Consolidated group taxation is not applicable in Brazil and, as a rule, group companies are not allowed to utilise separate company losses.

Exceptionally, there are some tax settlement programmes provided by the federal government that allow companies to offset tax loss credits accrued by group companies against federal taxes due.

The capital gains accrued by a Brazilian company will be included in the IRPJ/CSLL taxable base, subject to general rates described in 1.4 Tax Rates.

VAT on Sales and Services (ICMS)

VAT is a state tax levied on the imports of goods, the domestic circulation of goods, inter-municipal or interstate transport services, and communication services.

Generally, the ICMS rates are:

• 17% to 21% (rates vary depending on the goods) on imports and circulation of goods within the same state;
• 17% to 21% on communication services;
• 12% on transportation services;
• 4% on interstate transactions involving imported goods that do not undergo a manufacturing process after their customs clearance, or involving goods submitted to manufacturing if that manufacturing results in a final product for which more than 40% of the value is in its imported content;
• 7% on shipments from taxpayers based in the South/South East to taxpayers based in the North/North East/Central West and the state of Espírito Santo; and
• 12% on other interstate transactions.

Tax on Services (ISS)

ISS is a municipal tax on services levied on the import and the domestic rendering of services listed in a federal supplementary law. The ISS minimum and maximum rates are, respectively, 2% and 5%. The ISS rates vary in accordance with the service provided and the municipality competent to charge the tax.

IPI

IPI is a federal tax charged on the domestic shipment of goods from a manufacturing entity (or from an entity that the IPI legislation qualifies as a manufacturing entity even if there is no direct manufacturing, such as entities that import products for resale in Brazil), or on the import of goods (upon customs clearance of manufactured products). IPI rates vary according to the nature of the good (pharmaceutical products, for instance, are subject to zero rates as they are considered essential, whereas luxury or superfluous articles can be taxed at rates of up to 300%) and its classification under the IPI Table of Rates. IPI rates generally range from 3.25% to 19.5%.

Programa de Integração Social (PIS; social integration programme) and Contribuição para o Financiamento da Seguridade Social (COFINS; contribution for the financing of social security) are also due upon import of goods (rates of 2.1% and 9.65%, respectively) and services (rates of 1.65% and 7.6%, respectively).

Social Security Contributions on Revenues (PIS/COFINS)

PIS and COFINS are federal social security contributions levied on revenues earned by legal entities. Exceptions apply (eg, dividends and revenues derived from exports of goods or services). As a rule, the PIS and COFINS rates are 1.65% and 7.6%, respectively, if the company is subject to the non-cumulative system, and 0.65% and 3%, respectively, if the company is subject to the cumulative system.

Customs Duty (II)

The customs duty (II) is a federal tax due on Brazilian importers levied on imports of goods and charged for the clearance of such goods from customs. Applicable rates vary per imported item and may range from 0% to 35%. II is not a VAT.

Consumption Tax Reform (IBS, CBS and Selective Tax)

In December 2023, the Brazilian Federal Constitution was amended to implement consumption tax reform, aiming to simplify indirect taxes in Brazil. The main change provided by this amendment is the replacement of the ISS and ICMS with the tax on goods and services (Imposto sobre Bens e Serviços – IBS), and of PIS/COFINS with the contributions on goods and services (Contribuição sobre Bens e Serviços – CBS). The CBS and IBS will work as a dual form of VAT, providing simplicity and aligning the Brazilian tax system with international practice.

Further, the current IPI will be eliminated (except for some products that have an equal product manufactured in the Manaus Free Trade Zone), and a new selective tax was created to apply to transactions (domestic and imports) involving goods and services that are harmful to the environment or health.

The amendment also establishes a transition period of ten years in which the ISS, ICMS, PIS/COFINS and IPI will coexist with the IBS and CBS until they are eliminated in 2033. PIS, COFINS and IPI (for most products) are intended to be phased out as of 2027, and ICMS and ISS rates will be gradually reduced while IBS and CBS rates gradually increase.

Applicable IBS, CBS and selective tax rates still depend on further regulation.       

Tax on Financial Transactions (Imposto sobre Operações Financeiras – IOF)

A tax is levied on credit transactions at a 0.0082% daily rate plus a 0.38% surcharge, and on exchange transactions (generally at a rate of 3.5%) and insurance transactions (at rates varying from 0% to 7.38%), as well as on securities (at variable rates).

Urban Property Tax (Imposto Predial e Territorial Urbano – IPTU)

A municipal tax is levied annually on the ownership or possession of any real estate located in urban areas. The rates vary according to the municipality. In São Paulo, the rates range from 1% to 1.5%, with discounts or additions granted based on the market value and use of the relevant property.

Tax on Vehicle Ownership (Imposto sobre a Propriedade de Veículos Automotores – IPVA)

A state tax is levied annually on the ownership of land, water and air motor vehicles. The applicable rate may vary by state. In São Paulo, the tax rate varies from 1.5% to 4%.

Tax on Real Estate and Related Rights Transfer (Imposto sobre a Transmissão de Bens Imóveis e Direitos Reais – ITBI)

A municipal tax is levied on inter vivos and remunerated transfers of ownership or in rem rights over real estate. The applicable rate may vary by municipality. In São Paulo, the general rate is 3%.

Social Security Contributions

Social security contributions due by companies are generally composed of a fixed rate of 20%, which is supplemented by rates generally varying from 0.5% to 6% in the case of compensation paid to employees. For contributions to support welfare services (which are in addition to social security contributions), the rates are up to 5.8% above the compensation paid to employees.

Closely held local businesses usually operate in corporate form.

Income earned by individual professionals is subject to progressive rates up to 27.5%. In principle, the 34% corporate rate (25% IRPJ rate plus the 9% CSLL rate) is higher than the individual rate. However, if the company is subject to the deemed profit regime, there are some situations in which the effective corporate rate could be lower than the individual rate.

In view of this situation, if the Brazilian tax authorities understand that a company has been incorporated with the sole purpose of allowing the individual to earn income at a lower tax rate with little to no substance (eg, offices and employees), Brazilian tax authorities may challenge the existence of the company and tax the income as if it had been earned by the individual.

As of 2026, the distribution of dividends to individual shareholders and non-resident beneficiaries will be subject to 10% WHT. However, Brazil has not set out rules preventing closely held corporations from accumulating earnings for investment purposes, especially considering that the distribution of dividends to companies will remain exempt from WHT.

Distribution of dividends to individuals will be subject to 10% WHT from 2026. If an individual sells their shares in a Brazilian closely held corporation, the positive difference between the sale price and the acquisition cost will be taxed as capital gains and therefore subject to progressive rates of 15% to 22.5%. If the beneficiary of the capital gain is domiciled in a tax haven, a 25% WHT applies, regardless of the amount of the capital gain.

Distribution of dividends to individuals will be subject to 10% WHT from 2026. The gain on the sale of shares by Brazilian individuals in publicly traded corporations is subject to taxation at a rate of 15% as a rule. However, gains in day trade operations are subject to a tax rate of 20%.

The gains on the sale of shares in publicly traded corporations by non-residents are, in principle, tax exempt. If the non-resident investor is located in a tax haven, the gains will be taxed according to the rules applicable to investors resident in Brazil.

Distribution of dividends will be subject to 10% WHT from 2026 onwards if the amount of dividends exceeds BRL50,000 (approximately USD9,000) monthly and is distributed to individuals in Brazil or non-resident beneficiaries.

In general, royalties and interest paid by Brazilian residents to non-resident companies are subject to WHT at a rate of 15%. If the non-resident company is a resident of a tax haven, a higher tax rate of 25% is applicable. With regard to interest, certain specific cases involving investment funds may be subject to a zero rate.

Tax authorities in Brazil have shown themselves to be determined to collect WHT on the import of services. Local legislation has a broad concept of technical services – considering any service provided through the use of specific knowledge or that involves administrative assistance or consultancy, irrespective of any transfer of technology, to be technical in nature – and the tax authorities’ interpretation is that WHT is due regardless of the place where the services are provided. Tax authorities also seek to frame the import of services as royalties for treaty purposes. Most recent treaties have specific provisions for technical services that generally allow Brazil to charge WHT on amounts paid by Brazilian residents.

In addition, a contribution for the intervention in the economic domain (contribuição de intervenção no domínio econômico – CIDE) is also due, at a rate of 10%, from Brazilian residents on royalties and compensation for technical services paid to non-resident companies. CIDE is borne by the Brazilian resident (it is not a WHT).

Considering that dividends were previously exempt in Brazil and that the double tax treaties signed by Brazil allow the taxation of capital gains, there was generally no reason for foreign investors to use specific tax treaty countries to make investments in Brazil. However, with the recent implementation of a 10% WHT on dividends, this scenario will certainly change as of 2026.

Currently, the countries with which Brazil has signed a tax treaty, and which have the largest investments in Brazil, are the Netherlands, Luxembourg, France and Spain.

Due to the Brazilian IRPJ/CSLL particularities and to the fact that dividends were exempt from taxation in Brazil until 2025, it was not usual for Brazilian tax authorities to challenge the use of treaty country entities by non-treaty country residents. Nevertheless, the most recent double tax treaties signed by Brazil provide for limitations on the entities that are entitled to the benefits of a double tax treaty.

In the years after the substantial change to transfer pricing rules (for the purposes of alignment with the OECD transfer pricing guidelines), Brazilian corporations have tended to face issues regarding uncertainty about the tax treatment to be given by the Brazilian tax authorities in relation to customs duties when the taxpayer performs a year-end adjustment, as well as regarding the lack of options to resolve double tax scenarios (due to the fact that double tax treaties signed by Brazil do not provide for compensating adjustments).

Other practical issues include the lack of regulation on special situations such as transactions involving intangibles, cost contribution arrangements, intercompany services and advance pricing agreements.

Considering that the new Brazilian transfer pricing rules, mandatorily in force as of 2024, are based on the arm’s length principle, it is possible that discussions on the use of such arrangements will arise in the coming years.

The Brazilian transfer pricing rules have been substantially revised to align with the OECD transfer pricing guidelines. Although the rules only came into force in 2024, issues faced in recent years relate to difficulties in obtaining local comparables and timing issues with respect to performing year-end adjustments. Local legislation requires that the year-end adjustment is made at the end of the calendar year to which it refers.

Historically, the Brazilian tax authorities have tended to be aggressive regarding transfer pricing rules, even using secret comparables. Transfer pricing disputes are generally settled in administrative tax courts. Brazil does not include compensating adjustments in double tax treaties (Article 9.2 of the OECD Model Tax Convention). As such, double tax treaties are not used to settle transfer pricing disputes.

Although the mutual agreement procedure (MAP) is regulated in local legislation, this procedure is not yet common in Brazil.

The Brazilian transfer pricing legislation in force provides for compensating adjustments when the transfer pricing adjustment is performed spontaneously by the taxpayer, as long as certain requirements are complied with. Compensating adjustments are not allowed when a transfer pricing claim is settled.

Local branches and subsidiaries of non-local corporations are subject to the same tax treatment.

Capital gains acquired by non-resident individuals and legal entities on the sale of stock in local corporations are subject to WHT at progressive rates of 15% to 22.5%. If the beneficiary of the capital gain is domiciled in a tax haven, WHT of 25% applies, regardless of the amount of the capital gain.

There are no rules providing for taxation on the indirect sale of stock of a Brazilian company.

Brazilian tax legislation does not provide any rules for taxation on the indirect sale of stock of a Brazilian company. However, if the Brazilian tax authorities understand that a foreign holding company was used to avoid the triggering of taxation on capital gains in Brazil, they could disregard the holding company and consider that the price was paid for the acquisition of local company stock and thus subject to capital gain taxation as described in 5.3 Capital Gains of Non-Residents. There was an attempt to include change-of-control provisions in Brazilian tax legislation in the past, but it was unsuccessful.

Brazilian subsidiaries and branches are subject to the same rules for determining taxable income as described in 2.1 Taxable Profits, regardless of whether they are locally or foreign-owned.

As a general rule, in order for an expense to be deductible it is necessary to prove that such expense is necessary, usual and normal for the performance of the company’s activities/undertakings, and that it relates to services that were actually performed.

As for payments for management and administrative expenses incurred by a non-resident affiliate, since they are transactions with related parties, it is also necessary to comply with transfer pricing rules. As such, if expenses correspond to back office services, they probably fall under the definition of low value-added intragroup services, thus being subject to a simplified approach for transfer pricing (5% margin on costs).

The constraints applicable to related-party borrowing are transfer pricing and thin capitalisation rules, as described in 2.5 Deduction of Interest.

Brazilian companies are taxed on their worldwide income. Capital gains and income earned abroad, as well as the profits accrued by branches, affiliated companies or direct and indirect controlled companies abroad, are included in the taxable basis of IRPJ/CSLL at a general rate of 34% in the year they are accrued, regardless of their distribution or availability to the Brazilian controlling company.

To avoid double taxation, Brazilian legislation allows Brazilian companies to offset the income tax paid abroad with the IRPJ and CSLL due in Brazil, up to the limit of the IRPJ and CSLL levied in Brazil on such income.

Foreign income is not exempt in Brazil, so there are no rules limiting the deduction of local expenses because of attribution to exempt foreign income.

Because profits earned by foreign subsidiaries are included in the taxable basis of the IRPJ/CSLL of the controlling Brazilian company in the year that such profits accrued, dividends paid by subsidiaries are not taxed at the moment of their distribution.

The licensing of an intangible developed by a Brazilian company to a related party abroad is subject to Brazilian transfer pricing rules and thus should be compensated according to the arm’s length principle. Corresponding compensation or transfer pricing adjustment is subject to the IRPJ/CSLL.

Brazilian worldwide taxation rules tax profits earned by any subsidiary, affiliate or branch abroad. In view of this broad application of worldwide taxation, it is arguable that the Brazilian rules could be considered as controlled foreign corporation (CFC)-type rules.

Brazilian tax legislation does not provide any rules related to the substance of non-resident companies. However, Brazilian courts have already issued decisions stating that if the non-resident company’s substance is not verified, it could be disregarded for tax purposes.

Capital gains are included in the IRPJ/CSLL taxable base, similar to capital gains from local investments (see 2.7 Capital Gains).

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 purpose 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.

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.

Brazil has already implemented the following recommended 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;
• 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 pricing 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 instrument at the end of 2025 (pending enactment by Congress).

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.

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.

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 line with most of the BEPS actions.

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 the number of taxes, limiting different tax treatments and reducing tax litigation was implemented. The new taxes (IBS, CBS and the selective tax) will gradually apply as of 2026.

Recently, a 10% WHT on the distribution of dividends to resident individuals and non-resident beneficiaries was introduced, with the aim of guaranteeing that the overall tax burden for Brazilian companies (and consequently investors) will not exceed the 34% nominal IRPJ and CSLL rates. Supplementary Law 224/25 was also approved, aiming to reduce federal tax benefits by 10% as of 2026. These measures aim to maximise the tax collection.

Brazilian tax legislation provides for the tax deduction of a type of remuneration paid to shareholders (calculated on the net worth), known as interest on net equity (juros sobre capital próprio – JCP) – there has been some discussion as to whether this could be considered a hybrid instrument. Changes were recently introduced to legislation aiming to limit the amount of this deduction, as well as to increase the applicable WHT rate.

Brazil does not have a territorial tax regime. Brazil has had rules limiting the deduction on interest for quite some time, and this has not adversely affected investment.

Brazil does not have a territorial tax regime.

Considering that Brazilian tax authorities already adopt a substance over form approach and tend to disregard contracts, structures and transactions where they believe there is a strong case for doing so based on a lack of substance argument, it is not likely that the new double tax convention limitations will have any impact on inbound and outbound Brazilian investors.

In June 2023, Brazil modified its transfer pricing rules for the purposes of alignment with the OECD transfer pricing guidelines.

Given that the transfer pricing rules in force until the end of 2023 were different from the OECD guidelines, as they were based on fixed margins provided for in the legislation, the introduction of more subjective rules based on the arm’s length principle substantially changed the transfer pricing regime in Brazil.

As the new transfer pricing rules were only recently implemented in Brazilian legislation (January 2024) and have not been fully regulated by the tax authorities, it is not yet possible to determine whether the taxation of profits from intellectual property will be a source of controversy under the new regime.

Brazil has adopted a very favourable position on transparency in international taxation matters, being part of the information exchange network provided for in BEPS action 14 and having implemented the country-by-country report rules.

Although Brazil has not implemented changes in the legislation regarding digital economy businesses, Brazilian tax authorities have significantly changed their approach regarding the taxation of remittances made abroad related to the digital economy, taxing transactions that were not taxed before (or were subject to lower taxation).

A few proposals related to digital taxation have been discussed in the National Congress, but none of these have been successful yet. Nevertheless, the Brazilian tax authorities adopt an aggressive approach, aiming to tax almost all digital transactions at source.

Royalty payments related to offshore intellectual property deployed in Brazil are subject to WHT at a general rate of 15%. Payments made to tax havens are subject to an increased rate of 25%.