Brazil ratifies treaty with Singapore
On June 30, 2022, Brazil published Decree No. 11.109/2022, enacting the treaty for the
avoidance of double taxation and prevention of tax evasion (“DTA”) between Brazil and Singapore, signed on May 7, 2018.
Currently, Brazil has 35 DTAs in effect and the increase in such number is seen as a measure to encourage foreign investments, promote the development of economic and commercial
relations, foster tax cooperation and curb abusive tax planning.
Under the Preamble and Article 30 of Brazil Decree No. 11.109/2022, Brazil-Singapore DTA entered into force on December 1, 2021 (at the international level), and will only become effective in Brazil on January 1, 2023. However, there is a discussion of whether Brazil- Singapore DTA should be considered effective as of June 30, 2022 (when the Decree was published) or even as of January 1, 2022 (the first day of January following the date uponwhich the DTA has entered into force), as we explain in our comments to Article 30.
Please find below some of the key provisions of Brazil-Singapore DTA.
| DTA provisions and comments |
Brazil-Singapore DTA |
| Persons covered (Article 1) | Applies only to persons resident in the Contracting States.
Limits the use of transparent entities to unduly obtain |
| Residency (Article 4) | The person who is a tax resident, according to the domestic legislation of the Contracting State. Effective place of management as tie-breaker rule. |
| Dividends – maximum withholding tax (WHT) rate (Article 10)Currently, dividends are tax free in Brazil under domestic legislation. |
a) 10%, if conditions are met, including if the beneficial owner is a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends, within a period of one year.b) 15% in all other cases. |
| Interest – maximum WHT rate (Article 11) |
a) 10%, if the beneficial owner is a bank and the loan was granted for at least five years to finance the purchase of equipment or investment projects; orb) 15% in all other cases. Treats interest on net equity (INE) as an interest payment for treaty purposes (item 4, a of the Protocol to Brazil- Singapore DTA). Most Favored Nation clause: if after signing the treaty, Latin America) on rates that are lower (including |
| Royalties – maximum WHT rate (Article 12) |
a) 15% for use of trademark.
b) 10% in all other cases, including technical |
| Technical services – maximum WHT rate (Article 13) |
10% on the payment of compensation for technical services.Under Brazil-Singapore DTA, “compensation for technical services” means any payment as consideration for any service of a managerial, technical or consulting nature, unless payment is made: a) to an employee of the person making the b) by virtue of teaching at an educational institution c) by an individual for services for the personal use of |
| Capital gains (Article 14) Under Brazilian domestic legislation, non-resident capital gains are generally subject to WHT at progressive rates from 15% to 22.5% (except for beneficiaries located in low- tax jurisdiction, which is subject to the fixed rate of 25%). |
The source State may tax the capital gain arising from the sale of property (with no limitation). |
| Elimination of double taxation (Article 24) |
General rule: Entitles residents in both Contracting States to a deduction of tax credits for taxes paid in the other Contracting State. |
| Entitlement to treaty benefits (Article 28) |
A resident of a Contracting State shall not be entitled to a benefit that would otherwise be accorded by the DTA (other than a benefit under Article 9 or Article 26) unless such resident is a “qualified person”, as defined in paragraph 2 of Article 28 at the time that the benefit would be accorded. |
| Entry into Force (Article 30) | Each of the Contracting States shall notify the other through diplomatic channels the completion of the procedures required by its law for the bringing into force of the DTA.The DTA shall enter into force on the date of the reception of the second of these notifications and its provisions shall have effect in Brazil: i. in respect of taxes withheld at source, on income ii. in respect of other taxes, on income arising in the Under the Brazilian law, Brazil-Singapore DTA entered into |
Our team at Campos Mello Advogados, in cooperation with DLA Piper, Alex Jorge, Humberto Marini, Renato Lopes, Victor Kampel, Marcelo Siqueira, Paulo Takafuji and Laura Kurth can assist with you in case you have any questions.
Comentários