Brazil

The Brazilian Supreme Federal Court (STF) confirms a broad application of Brazil’s CIDE-Tecnologia on outbound payments

On 13 August 2025, in Extraordinary Appeal 928.943 (Theme 914), the STF upheld the constitutionality of 'CIDE-Tecnologia' and validated its application to remittances from Brazil to foreign beneficiaries under agreements that do not involve technology transfer. The ruling therefore supports the levy on payments for technical services, technical assistance, administrative assistance, and royalties more generally, not only on classic technology-transfer arrangements.

The decision was by a narrow majority, and the prevailing view was that the required connection to science and technology relates to how the revenue is earmarked and used, rather than limiting the taxable event only to contracts that themselves transfer technology.

After the judgment, the 10% CIDE charge applies broadly to cross-border payments by a Brazilian payer for:

• royalties, including copyright-related royalties
• technical services
• technical assistance, and
• administrative assistance, even if no technology is transferred under the contract.

The taxpayer is the Brazilian company that benefits from the right or service in Brazil. Economically, this means the Brazilian licensee or service recipient bears the contribution; it is not treated as a withholding from the amount due to the foreign recipient. The rate is 10% of the gross amount, and the taxable base also includes withholding tax (WHT) borne by the Brazilian payer.

In summary, the STF confirmed that Brazil’s CIDE-Technology is constitutional and that its 10% levy can apply to outbound payments for royalties and technical or administrative services even without technology transfer. The main remaining nuance is transaction classification, especially for software arrangements and any specific statutory incentive that may reduce the rate.

The STF confirms that the ICMS (State VAT) should not be included in the taxable basis of PIS and COFINS (Federal VATs)

The STF concluded the long-awaited judgment of the motion for clarification in the process in which it was determined that the ICMS amount informed by the companies in their invoices should not be included in the taxable basis of the PIS and COFINS.

The understanding of the STF allows companies to stop including such amount of ICMS in the PIS and COFINS calculation basis as of 15 March 2017. For companies that did not file a judicial or administrative measure until 15 March 2017, the retroactive recovery of the undue amount is limited until that date.

Brazilian Double Tax Treaties (DTTs) recent updates

Brazil–Sweden

The April 2025 amending protocol modernised the treaty by updating definitions of tax residence; refining WHT rules for dividends, interest, and royalties; expanding information‑exchange mechanisms; adding anti‑abuse clauses; offering clearer boundaries on withholding; and offering stronger protections against treaty shopping for structures involving both countries.

Brazil–India

The updated agreement, approved for promulgation in 2025, incorporates Organisation for Economic Co-operation and Development (OECD) base erosion and profit shifting (BEPS) standards; sets defined limits for withholding on dividends, interest, royalties, and technical services; updates capital‑gains and personal‑services rules; and recognises Brazil’s Social Contribution on Net Profits (CSLL) as a covered tax, prompting multinationals to adjust timelines, withholding bases, and contract terms to avoid double taxation.

Brazil–Chile

The approved protocol updates rules on residence, permanent establishment (PE, including short‑duration works and projects), royalties, and pension funds; strengthens information exchange; and facilitates reciprocal investment, providing more objective criteria for PE formation and clearer parameters for pension‑fund remittances and WHT eligibility.

Brazil–China

Promulgated in September 2025, the revised protocol enhances PE rules for construction projects; adjusts WHT rates on dividends, interest, and royalties; includes exemptions for governmental institutions; and introduces anti‑abuse measures, requiring groups with industrial chains and EPC contracts to monitor the duration and fragmentation of activities to avoid inadvertent PE creation.

Brazil–Norway

Promulgated in March 2025, the protocol updates residence and beneficial‑owner concepts; redefines PE rules (notably for shipyards, platforms, and support vessels); adjusts withholding limits; and strengthens information exchange and anti‑abuse measures, while maintaining residence‑state taxation for international transport, prompting offshore energy and shipping groups to review PE exposure, withholding policies, and documentation.

Signed but not yet in force

Furthermore, Brazil has also signed DTTs with Colombia, Poland, and the United Kingdom (UK). Such DTTs, however, are not yet in force.

Partial adoption of Pillar Two via Additional Social Contribution on Net Profits (Additional CSLL)

Brazil has enacted Pillar Two rules through Federal Law No. 15,079/2024 (published at the end of December 2024), which introduces a Qualified Domestic Minimum Top‑Up Tax (QDMTT) implemented as an Additional Social Contribution on Net Profits (Additional CSLL), effective 1 January 2025.

The Federal Revenue Service (RFB) issued Normative Instruction (IN) 2,228/2024 in October 2024 to operationalise the QDMTT mechanics and later aligned guidance following enactment of Law 15,079. On 18 August 2025, the OECD/G20 Inclusive Framework recognised Brazil’s Additional CSLL as a QDMTT and confirmed QDMTT Safe Harbour status from FY 2025, providing significant coordination relief vis‑à‑vis foreign Income Inclusion Rule (IIR) / Undertaxed Profits Rule (UTPR) computations and preserving Brazil’s primary right to collect top‑up in respect of Brazilian excess profits.

Scope and design

Brazil’s Pillar Two legislation adopts only the domestic QDMTT for now (via Additional CSLL) and does not implement the IIR or the UTPR. Law 15,079 applies to multinational enterprise (MNE) groups with 750 million euros (EUR) or more of consolidated revenue (tested under the standard ’two of the prior four years‘ rule), sets the 15% minimum effective rate benchmark, incorporates substance‑based income exclusions, and aligns the top‑up due date to the last business day of the seventh month after fiscal year‑end (e.g. July 2026 for FY 2025).

Brazil’s existing controlled foreign company (CFC) / full‑inclusion mechanics

Brazil’s longstanding approach of annual full‑inclusion of foreign profits (without deferral) under domestic CFC rules continues to apply; the QDMTT (Additional CSLL) operates alongside that framework to ensure a 15% jurisdictional minimum in Brazil and mitigate exposure to foreign IIR/UTPR top‑ups due to the QDMTT Safe Harbour status.

Brazil VAT / excise reform

Status and legal framework

On 20 December 2023, Brazil approved the constitutional amendment that launches a comprehensive consumption‑tax reform, replacing indirect (federal, state, and municipal) taxes with a dual VAT and a selective excise. In 2025–2026, the reform was further detailed by Complementary Law No. 214/2025 (implementing CBS/IBS) and by legislation derived from PLP 108/2024 (creating the IBS Management Committee - CGIBS and refining operational/administrative rules).

The main changes were the elimination of four taxes (Social Security Financing Contribution - COFINS, Contribution to the Social Integration Program - PIS, State Indirect Tax - ICMS, and Local Services Tax - ISS), reduction of the general IPI (Federal Tax on Manufactured Products) rate to zero, and the creation of three new taxes: Federal Contribution on Goods and Services (CBS), Subnational Tax on Goods and Services (IBS) shared by states and municipalities, and a Selective Excise (IS) focused on goods/services harmful to health or the environment.

The transition period will be marked by a coexistence of two tax systems, with old and new taxes collected in parallel for seven years:

• 2026: IBS shall have a rate of 0.1% and CBS a rate of 0.9%, whereas the amount collected shall be offset against PIS and COFINS amounts due.
• 2027:
  • Extinction of PIS/COFINS, provided that CBS is created.
  • Reduction of IPI rate to zero, except in relation to products that have industrialisation in the Manaus Free Trade Zone (ZFM).
  • IS collection begins.

• 2028:
  • IBS will be charged at the State and Municipal rates of 0.05% each.
  • CBS rate will be reduced by 0.1%.

• 2032:
  • ICMS and ISS rates will be reduced in the following proportions: 9/10 in 2029; 8/10 in 2030; 7/10 in 2031; and 6/10 in 2032.
  • ICMS and ISS benefits or incentives will be reduced in these same proportions until 2032, when they shall be effectively discontinued.
• 2033:  Full adoption of the new consumption tax system.

Reference rates: Current technical material points to a combined target VAT burden around approximately 27.5% to 28% once fully implemented (CBS ≈ 8.8% + IBS ≈ 17.7%), subject to final sectoral treatments and exemptions.

After the transition period, the expected simplification and rationalisation of the consumption tax regime is expected to be achieved, since the VAT reform:

• unifies the municipal, the state, and two federal taxes on consumption into the same type of VAT, although divided into a Federal and a Subnational VAT ('dual VAT')
• brings transparency, with the tax burden visible to taxpayers and consumers, and taxation at destination, eliminating the so-called 'fiscal war' between States, contributing to business decisions mainly driven by economic-financial rationale rather than tax advantages
• implements a fully non-cumulative system, eliminating tax leakages that are harmful to the competitiveness of Brazilian companies
• reinforces the tax relief on exports and investments through a reimbursement mechanism for accumulated credits
• contributes to reducing the country's tax litigation and compliance costs, and
• creates a fund to compensate companies benefiting from tax benefits related to ICMS, respecting the return on investments legitimately planned based on such incentives.

Implementation notes for 2026

• Complementary norms are advancing.

• 2026 is a pilot year (with limited rates) intended to adapt ERP/e‑invoicing and compliance workflows to CBS/IBS - soft‑landing with penalty waivers in early 2026 for e‑invoicing errors tied to the new model.

It remains essential to monitor complementary legislation and resolutions in 2026–2028 that will define operational specifics (e.g. IBS parameters, sector regimes, refunds, and documentation standards).

WHT on dividends

Starting 1 January 2026, Brazil reinstates WHT on dividends under Law No. 15,270/2025.

Dividends paid to non‑residents are subject to a 10% WHT, while dividends paid to Brazilian‑resident individuals are taxed at 10% when monthly receipts from the same company exceed 50,000 Brazilian reais (BRL); distributions below this threshold remain exempt.

Dividends paid between Brazilian legal entities continue to be exempt. Profits generated up to 31 December 2025 remain exempt if their distribution is formally approved by year‑end 2025 and paid according to the approved terms (including settlement until 2028).

These new rules mark the end of Brazil’s long-standing dividend exemption and apply to distributions made from 2026 onward.