Brazil finally enacted treaties to avoid double taxation of income with Chile and Uruguay.
In the case of Chile, the enactment took place through Decree No. 4,852, of 10/02/2023, approximately 20 years after its approval through a Legislative Decree issued by the Federal Senate, at which time it was possible to confirm that both signatory countries had already taken the necessary steps to approve the text of the treaty internally.
In the case of Uruguay, it was Decree No. 11,747, of 10/20/2023, which took much less time between its celebration and its promulgation by the Government: around 5 years.
Both were drawn up based on the OECD (Organisation for Economic Co-operation and Development) Model Convention, so that they include, for example, rules on:
– Permanent establishment;
– Profits of companies situated in a Contracting State and their taxation by that State;
– Royalties, which include remuneration for technical services and technical assistance; Right to credit for taxes paid.
In the case of the Brazil-Uruguay Treaty, the text, being more modern, already incorporates some of the BEPS (Base Erosion Profit Shifting) initiatives, an initiative adopted by the OECD to try to curb international tax planning considered aggressive, through the use of benefits provided for in treaties to eliminate or minimize income taxation.
The wording of paragraph 2 of Article 1 of the Brazil-Uruguay Treaty is striking, according to which income obtained through a company located in one State (Uruguay, for example) considered transparent will be considered income of a resident located in the other State (Brazil, for example). Depending on the interpretation, taking into account Brazilian laws, excluding the levy of Brazilian income tax on the profits of companies located in Uruguay based on the rule contained in Article 7 of the Treaty may become more difficult.
