Brazilian Tax Review – February 2020

The Supreme Court Criminalizes The Non-Payment Of ICMS Tax

The Supreme Court reached a majority decision to criminalize the non-payment of declared ICMS tax.

According to the court, since the ICMS is an indirect tax, the seller of goods (who pays the ICMS) is reimbursed the tax amount by transferring the charge to the buyer. Thus, the person that actually pays the tax is not the one who bears the financial burden.

For this reason, the Supreme Court held that, if the seller does not pay the ICMS tax included in the price of the goods and itemized in the tax invoice, this conduct will be considered misappropriation.

Notwithstanding, the Supreme Court held that only a seller who consistently and with intent to appropriate fails to pay the ICMS charged to the consumer who purchased the goods will be criminally punished.

Joint Project between the OECD and Brazil's IRS Issues the First Report on Transfer Pricing in Brazil

In February of 2018, the OECD and Brazil's IRS launched a joint project to examine the similarities and divergences between the Brazilian and the OECD transfer pricing approaches.

In December of 2019, the joint project issued its first report, which also explores options for Brazil to converge with OECD transfer pricing standards while enhancing the positive attributes of the existing framework.

Now, Brazil has identified a clear pathway for bringing its existing transfer pricing frameworks into alignment with the international consensus and is weighing two options - immediate or gradual implementation.

Brazilian Senate Discusses Bill that Reintroduces Dividend Taxation

A bill under discussion in the Senate would implement a 15% income tax on dividends distributed by Brazilian companies to their shareholders. For beneficiaries resident in tax havens or countries with favorable taxation, the tax rate would be increased to 25%.

The bill was presented to the Economic Affairs Committee of the Senate, where it must be approved. Afterwards, the bill must be approved by the Senate and the Chamber of Deputies before the presidential approval.

Brazil and Paraguay Sign an Automotive Free Trade Agreement

Brazil and Paraguay have signed an agreement that parts and vehicles sold by the two countries will have minimum or zero tariffs.

Paraguayan automotive products, parts and vehicles will have immediate free trade in Brazil. On the other hand, Brazilian products will be taxed at up to 2% in Paraguay, with this taxation being gradually...