Costa Rica, Madeira, and Singapore have been removed from the list of “tax havens” in Brazil. The changes were published in the official gazette in late December 2017.
The removal of Costa Rica, Madeira, and Singapore from the list of tax havens represents that concerning remittances from Brazil to recipients in those jurisdictions, the applicable tax rate of the Brazilian withholding income tax will be, in most instances, 15% (and not the 25% withholding tax rate that applies with respect to remittances made into tax havens).
However, while these three jurisdictions generally were declassified as tax havens, certain specific regimes within those jurisdictions are listed as “privileged tax regimes” including:
Transactions undertaken with entities subject to privileged tax regimes must observe the transfer pricing rules in Brazil—regardless of any corporate relation between the parties. The transfer pricing rules apply in addition to any stricter rules and limits of interest deductibility (thin capitalization).
There are adverse tax consequences to Brazilian multinationals investing abroad in legal entities subject to privileged tax regimes—including the prohibition of the consolidation of results; no taxation of the profits of affiliated companies under the cash basis regime; and no deduction of presumed tax credits in the amount of up to 9%.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.