National Congress approves minimum taxation of 15% for multinationals and extends Taxation on Universal Basis rules
On December 18, the Federal Senate approved Bill (PL) #3,817/2024 – that creates the additional Social Contribution on Net Income (CSLL Adicional) with the aim of establishing a minimum global tax rate of 15% applicable to multinationals with annual revenues exceeding €750 million, in line with the guidelines of the Organization for Economic Cooperation and Development (OECD) known as Pillar 2.
In addition, the aforementioned bill extends certain current rules of Taxation on Universal Bases (TBU) until 2029 and establishes that the Executive Branch must present, in 2025, a legislative proposal to change the TBU rules. The project already contains definitions of the entities that make up the multinational company groups and the concepts of GloBE profit or loss for each of them.
It also lists the taxes that are covered and adjusted by these companies and those that will not be considered for the purposes of this calculation. The text also explains the logic for forming the Effective Tax Rate and the transition rules. The Federal Revenue Service will regulate this charge, including currency conversion, adjustments to be made and the entire regulatory framework. These rules will be periodically updated to be in line with the reference documents approved by the OECD, so that they meet the requirements for qualifying the CSLL Surcharge as a Qualified Domestic Minimum Top-up Tax (QDMTT).
Brazilian Chamber Approves First Regulatory Bill of Tax Reform
On December 17, 2024, the Brazilian Chamber of Deputies approved the first bill regulating the country's tax reform, which now awaits presidential sanction. This legislation introduces significant changes to the national tax system, including the replacement of existing taxes with new ones and the implementation of tax refunds for low-income individuals.
The approved bill establishes the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS), which will replace current taxes such as Social Integration Program (PIS), Contribution to Social Security Financing (Cofins), Tax on the Circulation of Goods and Provision of Services (ICMS), Tax on Services of Any Nature (ISS), and partially the Tax on Industrialized Products (IPI). Notably, the legislation includes provisions for refunding 100% of the CBS and 20% of the IBS on utility bills—such as electricity, water, gas, and telecommunications—for low-income households.
Additionally, the bill sets a maximum tax rate of 0.25% for minerals, a reduction from the previously proposed 1%. It also introduces a 30% tax reduction for pet health insurance plans and a 60% reduction in the general tax rate for medications not listed with a zero rate. Foreign tourists will benefit from tax refunds on products purchased in Brazil and carried in their luggage. The legislation maintains a tax rate of 8.5% for Football Joint-Stock Companies (SAF). While exemptions for meats, fish, cheeses, and salt were preserved, the Chamber reversed a Senate suggestion and maintained the selective tax on sugary beverages. Notably, firearms and ammunition were excluded from the selective tax, which will partially replace the IPI with lower rates.
A new feature in the national tax system is the tax refund (cashback) for low-income individuals. This benefit will be available to heads of families registered in the Unified Registry for Social Programs (CadÚnico) with a per capita monthly income of up to half a minimum wage. The refund rules will take effect in January 2027 for the CBS and in 2029 for the IBS, aiming to alleviate the tax burden on essential services for the most vulnerable populations.
Brazil’s Central Bank Accelerates Rate Hikes, Raises Selic to 12.25%
The Central Bank of Brazil's Monetary Policy Committee (Copom) raised the Selic interest rate from 11.25% to 12.25% annually, marking a stronger monetary tightening effort. This decision comes as inflation remains a persistent challenge, despite previous measures to control it. The committee highlighted the importance of adjusting interest rates to curb inflationary pressures and maintain economic stability.
Copom stated that the move aligns with its goal of anchoring inflation expectations and creating conditions for sustainable economic growth. The decision reflects a more aggressive approach, as the inflation outlook for the coming months continues to pose risks to economic stability and consumer purchasing power.
The Selic rate increase underscores the Central Bank’s commitment to its inflation-targeting framework. The bank aims to balance economic activity and price stability, signaling further rate hikes may be considered if inflationary pressures persist. The decision also impacts borrowing costs, investment, and overall economic momentum in Brazil.
Brazil’s Federal Revenue Updates 'Consensus Revenue' Program with New Rules and Focus on Cooperation
On November 1, 2024, Brazil's Federal Revenue implemented Portaria RFB #495, introducing significant changes to the 'Consensus Revenue' program. This initiative aims to prevent and resolve tax and customs disputes through consensual means, emphasizing dialogue between public administration and taxpayers.
The program targets companies with high compliance levels under the Tax and Customs Compliance Incentive Programs, offering a simplified process to enhance legal security. It is also integrated with the Confia program, reinforcing trust and transparency in tax relations.
Key updates include the elimination of admissibility reviews for companies participating in the Confia program and the introduction of summary hearings to expedite processes and reduce bureaucracy. The regulation also emphasizes confidentiality, ensuring that submitted documents remain secure and private.
Additionally, the new rules allow for extending the deadlines for fulfilling agreed-upon solutions by up to 90 days, provided both parties consent. This flexibility aims to accommodate complex cases while maintaining cooperative dynamics.
With these changes, the Federal Revenue seeks to streamline the resolution of tax and customs disputes, reduce fiscal litigation, and foster a more collaborative relationship with taxpayers, positioning 'Consensus Revenue' as an effective tool for modernizing Brazil's tax administration.
Committee Approves Tax Incentives for Research and Innovation
The Science and Technology Committee (CCT) approved on Wednesday, December 11, 2024, a bill allowing private research and development institutions to participate in special tax regimes and public programs aimed at stimulating and promoting innovation (PL #2.252/2022).
The approved legislation enables research and innovation companies to benefit from tax reductions on levies such as the Tax on Industrialized Products (IPI), PIS Importation, Cofins Importation, Income Tax, and Social Contribution on Net Profit (CSLL).
The bill, originating from the Chamber of Deputies, received a favorable report from Senator Marcos Pontes (PL-SP) and will proceed to the Plenary for further consideration.
To qualify for these incentives, corporate research and innovation centers (CPIEs) must meet specific criteria, ensuring that the benefits are directed towards entities actively contributing to technological advancement.
This initiative aims to bolster private investment in scientific research, enhance the innovative capacity of Brazilian companies, and increase the nation's competitiveness on the global stage.
Committee Approves Draft Bill with General Rules for Foreign Trade
The Senate's Committee on Foreign Relations and National Defense (CRE) approved on November 13, 2024, a draft bill establishing general norms for foreign trade of goods. The proposal, presented by Senator Esperidião Amin (PP-SC), consolidates over a hundred existing legal norms into a single framework, aiming to modernize and simplify Brazil's customs legislation, which has remained largely unchanged since 1966.
The draft bill comprises 172 articles designed to provide legal security to the productive sector by ensuring that regulation, control, and supervision activities in foreign trade adhere to principles of transparency, speed, and simplification. It introduces mechanisms to facilitate trade operations, aligning Brazilian practices with international standards, and emphasizes the reduction of bureaucratic barriers to enable more efficient customs procedures.
Senator Renan Calheiros (MDB-AL), president of the CRE and author of the original proposal (PL 508/2024), highlighted the necessity of updating the outdated customs legislation to match the current dynamism of global economies and foreign trade relations. The draft bill is the result of collaborative efforts involving the Federal Revenue Service, the Senate's Legislative Consultancy, and contributions from both the private and public sectors.
The proposal now proceeds to the Senate Plenary for further deliberation. If approved, it will represent a significant step toward enhancing Brazil's competitiveness in the global market by providing a more rational and up-to-date legislative framework for foreign trade.
STF Forms Majority to Approve Inheritance Tax Exemption on Pension Plans
The Brazilian Supreme Federal Court (STF) has reached a majority decision to exempt the collection of the Inheritance and Donation Tax (ITCMD) on transfers to beneficiaries of private pension plans upon the plan holder's death. This ruling affects two prevalent private pension plans in Brazil: the Free Benefit Generator Plan (PGBL) and the Free Benefit Generator Life Insurance (VGBL).
Previously, certain states imposed the ITCMD on these pension plans, with tax rates varying by region. For instance, São Paulo applied a flat rate of 4%, while the Senate set a maximum rate of 8%. With the STF's decision, such taxation on PGBL and VGBL plans will be deemed unconstitutional, preventing states from levying this tax even if state laws had authorized it.
The judgment process began in August when the rapporteur, Minister Dias Toffoli, voted against the constitutionality of the tax, receiving support from Ministers Alexandre de Moraes and Flávio Dino. After a temporary suspension due to a request for further analysis by Minister Gilmar Mendes, the virtual trial resumed in December. Subsequently, Ministers Gilmar Mendes, Cristiano Zanin, André Mendonça, Luiz Fux, and Edson Fachin aligned with the rapporteur's stance, solidifying the majority.
Legal experts note that, following the STF's decision, states will be prohibited from taxing these pension plan transfers, regardless of existing state legislation. This development underscores the importance of understanding the legal distinctions between different financial instruments and their respective tax treatments, particularly in the context of inheritance and estate planning.
Treaty approved between Brazil and Norway to avoid double taxation
The Senate Plenary approved the texts of the protocol and convention between Brazil and Norway for the Elimination of Double Taxation with Respect to Income Taxes and the Prevention of Tax Evasion and Avoidance (PDL #260/2024). The convention and protocol were signed in Brasília, on November 4th, 2022. Reported by Senator Renan Calheiros (MDB-AL), the text now awaits promulgation.
According to the government, the treaty has a broad spectrum, reflects a balance between the interests of the two countries and meets the Brazilian policy for treaties of this type. The convention aims to eliminate or minimize double taxation of income and define the tax jurisdiction of the contracting countries in relation to the various types of income, bringing greater security to business in general. It also seeks to favor Norwegian investments in Brazil, as well as Brazilian investments in Norway, and strengthen the possibilities of cooperation between the tax administrations of the two countries.
For Renan Calheiros, the bill deals with international instruments that are relevant to relations between Brazil and Norway, following the pattern of treaties signed to avoid double taxation. Renan states that both countries will benefit from the approval of the treaty and that Brazil's interests are adequately protected. According to the senator, the Brazilian policy regarding treaties to avoid double taxation is essentially preserved.
