Switzerland Is No Longer Black-Listed In Brazil

As from January 1st, 2014, Switzerland may be deemed to be a viable jurisdiction for foreign companies that intend to invest in Brazil.

On June 4, 2010, the Secretary of the Brazilian Federal Revenue Office (Receita Federal do Brasil - RFB) issued RFB Normative Instruction No. 1037 (IN 1037/2010), which contains a list of the so-called "favored taxation countries". The inclusion of Switzerland in this list was temporarily suspended by the RFB's Secretary by means of Executive Declaratory Act No. 11, of June 24, 2010 (ADE 11/2010).

For Brazilian tax purposes "favored taxation country or dependency" (país ou dependência com tributação favorecida) means any country or dependency of a country that does not impose tax on income or, when imposes, it is a low-tax country, in which the applicable income tax rate is equivalent to any percentage varying between zero and 20% (maximum)1.

Now, as a result of RFB Normative Instruction No. 1474, of June 18, 2014 (IN 1037/2010), published in the Official Gazette of the Union (Diário Oficial da União - DOU) of June 20, 2014, is no longer considered a "favored taxation country".

However, certain Swiss legal entities are classified as "privileged fiscal regime" (regime fiscal privilegiado).

"Privileged fiscal regime" means any jurisdiction that met one or more of the following requirements: (i) it does not tax income or where the maximum applicable tax income rate is below 20%; (ii) it grants fiscal advantages to a non-resident individual or legal entity: (a) without requiring that substantial economic activity be made in the country or dependency; or (b) conditioned to the non-exercise of substantial economic activity in the country or dependency; (iii) it does not tax the earnings obtained outside its territory or imposes a maximum applicable rate below 20% to such earnings; (iv) it does not permit access to information regarding the capital stock structure, ownership of assets or rights or to the economic transaction entered into between the parties2. All these percentages may be reduced or changed at any time by the Executive Branch.

According...