| Photo: Rio de Janeiro City Skyline during Night Time by Natã Romualdo
DRAFT APA (ADVANCE PRICING AGREEMENT) REGULATIONS OUT FOR PUBLIC CONSULTATION
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Overly Restrictive Regulations: The program is limited to taxpayers enrolled in cooperative compliance programs.
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Limited Annual Quota: Only a certain number of APA requests are accepted per year, raising concerns over capacity and inclusivity.
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Need for Refinement: The draft mixes APA and ICAP (International Compliance Assurance Programme) concepts. Better to have a managed queue system rather than limit access.
DRAFT SERVICE REGULATIONS
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Benefit Test Alignment: Generally consistent with the arm’s length principle (ALP).
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Asset Use Transactions: These are categorized as services. Further analysis is expected.
CORPORATE TAX RATE INCREASE PROPOSALS
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General CSLL (Social Contribution on Net Profit) Rate: Temporarily increased from 9% to 10%, raising the general corporate tax rate from 34% to 35%.
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Financial Sector (FS) CSLL Rate: Increased to 22%, raising the corporate tax rate for financial institutions to 47%.
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Temporary Measure for CY2025: This rate hike reignites discussions on reintroducing a dividend withholding tax (WHT). Ideally, this would lead to a corporate tax rate decrease, but current government efforts focus on balancing the 2025 Proposed Budget (PLOA).
EXPANSION OF SETTLEMENT PROGRAMS FOR TAX LITIGATION
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Focus on Key Transactions: Including Transfer Pricing, Non-Resident Capital Gains Tax, and other issues significant for multinationals.
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Broader Settlement Program: Announcement by the Federal Tax Attorneys office suggests new mechanisms for cases mired in lengthy litigation.
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Not Quite Amnesty: The new program appears to offer more certainty in tax disputes, potentially resulting in mutually acceptable settlement positions for both Treasury and taxpayers.
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Risk and Time-Related Discounts: Proper calculation of these discounts could facilitate the resolution of protracted disputes.
INCREASE IN WITHHOLDING TAX (WHT) ON INTEREST ON EQUITY (INE)
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WHT Rate Increase: Proposed increase from 15% to 20%, effective immediately upon the proposed law’s approval.
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Clarification on Triggering Events: Focus on credit or payment, potentially capturing later payments of INE that are declared, accrued, but not yet paid.
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Strategic Positioning: This measure may open up negotiations on both dividend WHT and corporate tax rates.
