Profits/dividends distributed to resident or non-resident beneficiaries (individuals and/or legal entities) are generally not subject to IRRF (Brazilian term for withholding income tax) (please see the Income determination section for more information). This provision is also applicable to dividends paid to non-resident companies located in a tax haven jurisdiction.
The IRRF rate applicable to payments for services, royalties, and interest to non-resident companies or individuals is generally 15% but can be increased to 25% in certain cases. Other transactional taxes also need to be considered on such payments.
Payments for services, royalties, and interest to non-resident companies located in a tax haven jurisdiction (black list only) are subject to IRRF at the rate of 25%.
The RFB issued guidance in relation to how they should treat certain service fees, which, in effect, allow certain payments to be exempt from IRRF in Brazil, under certain tax treaties.
Certain types of income paid by Brazilian companies to non-resident recipients are subject to IRRF as follows:
|Recipient||IRRF (%) (3)|
|Non-resident companies and individuals:|
|China, People’s Republic of||15||15||15/25|
|Korea, Republic of||10/15||10/15||10/15/25|
|Trinidad and Tobago||10/15||15||15|
|United Arab Emirates||5/15||10/15||15|
- Note that the remittance of dividends is generally not subject to taxation in Brazil.
- Treaty rates in excess of those in force for non-treaty countries are automatically reduced. The relevant treaty should be consulted on a case-by-case basis to confirm that the tax reduction is applicable in each case.
- For treaties with multiple IRRF rates, the following rules generally apply:
- Dividends: If there was IRRF on dividends, which is not the case according to Brazilian legislation, the 10% (or 15%) rate would generally apply if the beneficial owner is a company that directly holds a certain minimum participation in the capital of the company paying the dividends; the 15% (or 25%) rate is considered for all other cases.
- Interest: The 10% rate generally applies to loans with a certain minimum term granted for specific purposes (e.g. acquisition of capital goods); the 15% rate is considered for all other cases.
- Royalties: The 10% rate generally applies to royalties arising from the use of, or the right to use, cinematographic films, films or tapes for television or radio broadcasting, and any copyright of literary, artistic, or scientific work produced by a resident of a contracting state; the 25% (or 15%) rate generally applies to royalties arising from the use of, or the right to use, trademarks; and the 15% (or 10%) rate is considered for all other cases.