Normative Instruction 1.683 RFB / 2016, published in Official Gazette by the end of December, amends Normative Instruction 1.037 RFB/2010, which lists countries or dependencies with favored taxation and privileged tax regimes.
The purpose of the amendment is to harmonize the treatment of holding companies incorporated in Austria to the treatment of holding companies incorporated in Denmark and the Netherlands. Thus, regarding the legislation of the Republic of Austria, the privileged tax regime applied to legal entities constituted in the form of a holding company only involves those that do not exercise substantive economic activity.
The concept of a privileged fiscal regime was designed to allow the application of Transfer Pricing controls to transactions with entities that enjoy a more beneficial tax regime and which, potentially, may lead to a reduction in the Brazilian taxable base, even if the legislation of the country or dependency in which the beneficiary resides or is domiciled.
It is understood that the legal entity that performs the activity of holding company carries out substantive economic activity when it possesses, in its country of domicile, adequate operational capacity for its purposes, evidenced, among other factors, by the existence of own qualified employees in sufficient number and physical facilities suitable for the management and effective decision-making regarding the development of activities in order to obtain income derived from the assets at its disposal or to the management of shareholdings in order to obtain income deriving from the distribution of profit and the capital gain.
It is an important rule to define the concept of holding companies.
The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
Gabriel Quintanilha is based in Rio de Janeiro. Gabriel has been an attorney at law since 2006. He is also Professor of Tax Law at Fundação Getulio Vargas – FGV and IBMEC. Author of books and articles published in Brazil.
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