In a judgment handed down by the 1st Panel of the Superior Chamber of the Administrative Council of Tax Appeals (CARF), it was understood that profits earned by subsidiaries of Brazilian companies located in countries with which Brazil has a Treaty to Avoid Double Taxation of Income must be taxed only in the countries of domicile, that is, in the country where the subsidiary is located.
This is an important precedent in favor of taxpayers and involves the issue of taxation under Provisional Measure 2.158-35/2001, a rule that established the taxation of profits of foreign affiliates or controlled companies in Brazil. It is hoped that this decision will serve as inspiration for the CARF when analyzing the taxation of profits of foreign affiliates and controlled companies based on Law No. 12.973/2014.
