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January 3rd, 2018

Brazil simplifies rules for offsetting income tax paid abroad

Brazilian “IRS” published Normative Ruling no. 1,772 modifying the procedure for offsetting income tax paid abroad by associated companies of a Brazilian entity.

On December 26, 2017 the Brazilian “IRS” published Normative Ruling no. 1,772 modifying the procedure for offsetting income tax paid abroad by associated companies of a Brazilian entity against income tax due in Brazil.

Prior to the publication of this “Normative Ruling”, it was necessary to obtain the document proving the payment of the tax abroad to the local collecting agency, and then submit it to the Brazilian consulate in the country.

RFB IN 1,772/2017 allows the use of a “Hague Apostille” as an alternative to that procedure with a translation into Portuguese prepared by a certified translator.

The Brazilian IRS also created a procedure that exempts consularization of documents in the event that Taxpayers present financial statements and prove that the legislation of the country of origin of the profit provides income tax is levied, and that is has been paid through the tax returns presented.

These changes are important because most of the administrative decisions rendered by the Administrative Tribunal of Revenue in which Brazilian tax offsets are denied, occur because the documentation proving the payment abroad is insufficient.