Switzerland – Double Taxation Treaty with Brazil Entering into Force

CH - Double Taxation Treaty with Brazil

The double taxation agreement between Switzerland and Brazil has now entered into force and the provisions of the agreement will apply from 1 January 2022. In this GMS Flash Alert, we highlight some of the new provisions.

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Brazil and Switzerland signed their first double taxation treaty (“DTT”) pertaining to income taxes in May 2018.  The DTT has now entered into force and the provisions of the agreement will apply from 1 January 2022.1, 2  The DTT aims to promote the development of economic and commercial relations as well as foster tax cooperation between Brazil and Switzerland.

Brazil is Switzerland’s most important trading partner in Latin America.2

This article summarises briefly the most important aspects of the new DTT. 

WHY THIS MATTERS

The provisions on the avoidance of double taxation should help foster cross-border commerce and protect cross-border workers against the risk of double taxation.  The provisions on the exchange of information provide an additional impetus for Switzerland-Brazil cross-border workers to be compliant with their tax obligations and are in line with the most updated OECD standards. 

Background and Key Points of the DTT

On 3 May 2018, Brazil and Switzerland signed a DTT concerning income taxes – the first such agreement between the two countries.  It entered into force on 16 March 2021 and its provisions will apply from 1 January 2022

The DTT takes account of the OECD’s base erosion and profit shifting (BEPS) project by including an anti-abuse clause.Treaty abuse, so-called “treaty shopping,” is essentially a situation where a person benefits from the DTT between two jurisdictions without being a resident of one of those countries.  BEPS’s Action 6 Report states the requirements to establish a minimum level of protection against treaty abuse.4

The administrative assistance clause in this new DTT establishes required cooperation in terms of exchange of information, including automatic exchange, to the recovery of foreign tax claims, which addresses the current international standard.5

FOOTNOTES

1  See (in English) “Entry into force of double taxation agreements with Brazil” at: https://www.sif.admin.ch/sif/en/home/dokumentation/fachinformationen/dba-brasilien-saudiarabien.html.

2  See (in English) “Switzerland and Brazil sign double taxation agreement” at: https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-70663.html.

3  Ibid.

4  See “Action 6, Prevention of tax treaty abuse” at: https://www.oecd.org/tax/beps/beps-actions/action6/.

5  See “Convention on Mutual Administrative Assistance in Tax Matters” at: https://www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm.

The information contained in this newsletter was submitted by the KPMG International member firm in Switzerland.

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© 2022 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

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Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. 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.

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