Fonte: International Tax Review

Brazil appears to be adopting protocols to align national taxation with international standards, but recent changes are not immune from criticism, experts tell ITR

An update to Brazil’s favourable taxation jurisdictions which took effect this month could prompt challenges based on international treaties or law, ITR has heard as local experts dissect the amendment.

The Brazilian Federal Revenue Service published Normative Ruling No. 2,265/2025 on May 13.

It removes the United Arab Emirates (UAE) from a list of low-tax jurisdictions and the Austrian holding company regime from a list of privileged tax regimes.

The Austrian holding company regime covers companies that do not engage in substantial economic activities.

Being included on the low-tax jurisdiction or privileged tax regime list comes with consequences.

Examples include the immediate application of transfer pricing rules and a reduced debt-to-equity ratio under thin capitalisation rules.

The low-tax jurisdiction list now includes 60 jurisdictions, following the UAE’s removal. Meanwhile, the privileged tax regimes list includes 11 jurisdictions – it is understood.

In addition, the normative instruction has lowered the income tax rate threshold from 20% to 17% when applying the low-tax jurisdiction and privileged tax regime rules.

A step forward

Allan Fallet, a tax partner at law firm Duarte Garcia, Serra Netto e Terra in São Paulo, tells ITR the reduction to 17% reflects an attempt to adapt the Brazilian tax system to the global landscape.

The new threshold aligns more closely with current international standards, such as the proposed 15% global minimum tax under the OECD’s pillar two, Fallet observes.

Fallet also tells ITR of a flexibility provided under Article 24-A of Law No. 9,430/1996, which is being invoked to remove the UAE.

This provision allows for the removal of a country from the list of jurisdictions with favourable taxation (JFTs) or privileged tax regimes when it effectively promotes national development, he explains.

“This illustrates the strategic use of that provision as a tool for fiscal and economic policy…and [signals] the potential for more dynamic decisions based on economic, as well as fiscal, criteria,” says Fallet.

However, the changes resulting from the normative ruling are not immune from criticism, Fallet adds.

The subjectivity in applying the criteria may lead to challenges based on international treaties or the non-discrimination principle in international tax law, he claims.

This, Fallet argues, could especially occur where there are allegations of unequal treatment among jurisdictions with comparable tax frameworks.

“It is therefore essential that the criteria be transparent, consistent, and predictable, to avoid the perception that the JFT list serves as a geopolitical pressure mechanism rather than a technical tool to ensure proper application and compliance with international tax rules,” he says.

Despite these fears, Fallet believes that, ultimately, the amendments represent a meaningful step toward the modernisation of Brazil’s international tax regime.

“While aimed at strengthening mechanisms to combat tax evasion and avoidance, the changes also seek to promote sustainable foreign investment, reaffirming Brazil’s commitment to international cooperation and responsible economic competitiveness,” he says.

Lacking substance

Francisco Lisboa Moreira, a tax partner at Alma Law in Brazil, has linked the exclusion of the Austrian holding company regime from the list of privileged tax regimes to diplomatic efforts on the part of the Austrian government.

Austria, according to Moreira, was able to secure exclusion through explaining the tax regime applicable to such holding companies in more detail to Brazil.

“We must believe that, in recent years, Austria was able to implement anti-abuse and economic substance requirements in line with the EU directives,” says Moreira.

“The demonstration of real economic activity, such as [a company] possessing its own office, employees and operational capacity beyond the simple ‘asset administration’ are in line with the Brazilian requirement and are contained in Austrian law.”

Moreira then questions whether the wording of the normative instruction is needed if a holding company has economic substance in Austria.

“Given the automatic application of the normative instruction, Brazilian taxpayers were having a very hard time trying to prove [economic substance] when making payments abroad.

“The assurance provided by the Austrian government – that a holding company lacking substance would also be targeted by the EU directive and Austrian law, was a reinforcement that provided the comfort needed by the Brazilian tax authority,” he says.

Meanwhile, Felipe Medeiros, an attorney at Monteiro e Monteiro Advogados Associados in São Paulo, tells ITR that attracting foreign direct investment formed a part of the reasoning for the amendment.

The possibility of excluding a country from the list of favourable tax jurisdictions for economic reasons is expressly stated in Article 24-C of Federal Law No. 9,430/1996, Medeiros notes.

Countries included in the list of favourable jurisdictions face worse tax rules by virtue of their inclusion, according to Medeiros.

But change brought about by the normative ruling favourably impacts the taxation of withholding tax on non-resident income, which may encourage an increase in foreign investment – he argues.

The normative ruling’s adjustment of the maximum tax rate from 20% to 17% on income as well as the new requirement for identification of the beneficial owner of income attributed to non-residents is also noteworthy, Medeiros tells ITR.

Agreeing with Fallet, Medeiros says it appears that Brazil is adopting substantive protocols to align national taxation with international standards.

Brazil is aiming to avoid deterring investment and national growth, while not disregarding the need for transparency regarding the recipients, interested parties, or beneficiaries of foreign capital – he tells ITR.