Brazilian Tax Authorities Issue a New List of Favored Taxation Countries

On June 4, 2010, the Secretary of the Brazilian Federal Revenue Office (Receita Federal do Brasil – RFB) issued RFB Normative Instruction nº 1037, which contains an updated list of favored taxation countries (países com tributação favorecida) formed by the so-called "tax haven countries" (paraísos fiscais)1. The new list is in full force and effect as from June 7, 2010, date of its publication in the Official Gazette of the Union (Diário Oficial da União – DOU)

For the purpose of this list (which is deemed to be a "black-list"), the Brazilian tax authorities included the countries or dependencies that, according to the Brazilian Government, do not impose tax on income or, in which the applicable income tax rate is equivalent to any percentage varying between zero and 20% (maximum), as well as whose national legislation does not allow access to the information regarding the capital stock structure or ownership of the legal entities organized under the laws of any such jurisdiction. The current list comprises the following jurisdictions: (i) Andorra; (ii) Anguilla; (iii) Antigua and Barbuda; (iv) Netherlands Antilles; (v) Aruba; (vi) Ascension Island; (vii) The Commonwealth of The Bahamas; (viii) Bahrein; (ix) Barbados. (x) Belize; (xi) The Bermuda Islands; (xii) Brunei; (xiii) Campione d'Italia; (xiv) Channel Islands (Alderney, Guernsey, Jersey and Sark); (xv) Cayman Islands; (xvi) Cyprus; (xvii) Singapore; (xviii) Cook Islands; (xix) Costa Rica; (xx) Djibouti; (xxi) Dominica; (xxii) United Arab Emirates; (xxiii) Gibraltar; (xxiv) Granada; (xxv) Hong Kong; (xxvi) Kiribati; (xxvii) Labuan; (xxviii) Lebanon; (xxix) Liberia; (xxx) Liechtenstein;; (xxxi) Macau; (xxxii) Madeira Island; (xxxiii) Maldives; (xxxiv) Isle of Man; (xxxv) Marshall Islands; (xxxvi) Mauritius Island; (xxxvii) Monaco; (xxxviii) Montserrat Island; (xxxix) Nauru; (xl) Niue Island; (xl) Norfolk Island (xlii) Panama; (xliii) Pitcairn Islands; (xliv) French Polynesia; (xlv) Qeshm Island; (xlvi) American Samoa; (xlvii) Eastern Samoa; (xlviii) San Marino; (xlix) Saint Helena Island; (l) Saint Lucia; (li) The Federation of Saint Kitts and Nevis2; (lii) Saint-Pierre and Miquelon Island; (liii) Saint Vincent and the Grenadines; (liv) Seychelles; (lv) Solomon Islands; (lvi) The Kingdom of Swaziland; (lvii) Switzerland; (lviii) The Sultanate of Oman; (lix) Tonga; (lx) Tristan da Cunha; (lxi) Turks and Caicos Islands; (lxii) Vanuatu; (lxiii) U.S. Virgin Islands; (lxiv) British Virgin Islands.

The novelties in relation to the former list of 2002 are Switzerland and the following additional offshore jurisdictions: Ascension Island, Brunei, Kiribati, Norfolk Island, Pitcairn Islands, French Polynesia, Qeshm Island, Saint Helena Island, Saint-Pierre and Miquelon Island, Solomon Islands, The Kingdom of Swaziland and Tristan da Cunha. Luxembourg was eliminated from this list and included as a privileged fiscal regime, as commented below.

The main consequence is that the listed countries and dependencies are subject to a higher withholding income tax rate on the remittance abroad of capital gains and of the remuneration...