Brazil imposes additional requirements for the tax deduction of interest paid abroad
October 20, 2010
An executive measure on interest deduction between related parties was issued in Brazil almost a year ago. But, as Ana Lúcia Marra and Cristiane Magalhães of Machado Associados explain, there is still some doubt about when it applies from.
Until November 2009, the tax deduction of interest paid by Brazilian companies to their foreign related parties or to individuals and legal entities domiciled in low tax jurisdictions or under certain privileged tax regimes was subject to compliance with the general rule applicable to the deduction of expenses for the Corporate Income Tax (IRPJ) and to the Brazilian transfer pricing rules applicable both for the deduction in the calculation of the IRPJ and the Social Contribution on Net Profit (CSLL). As of December 16 2009, Executive Measure No 472, converted in June 2010 into Law No 12,249, introduced additional requirements for the tax deduction of such interest that have considerably changed the situation for Brazilian companies.
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