Brasília – President Jair Bolsonaro enacted on Wednesday (26) the convention signed between Brazil and the United Arab Emirates to eliminate double taxation concerning income taxes and prevent tax evasion and avoidance. Tax avoidance occurs when companies try to reduce tax payments, and tax evasion consists of evading the payment of taxes.
The protocol between the two countries was signed in November 2018 and then passed through the Brazilian National Congress. The promulgation by the president gives effect to the agreement, which now officially enters into force.
The convention has 32 articles, including one that establishes that there will be no interpretations to restrict, in any way, the right of a contracting State to tax its residents. According to the text, the targeted taxes are, for the Brazilian side, income tax and social contribution on net income. On the UAE side, they are income tax and corporate tax.
The text regulates taxation on real estate income, corporate profits, and maritime and air transport. It also contains provisions regarding taxes on the activities of associated companies, dividends, interest, royalties, capital gains, pensions, natural resources, remuneration for technical services, public offices, independent personal services, employment income, payment for directors, artists, athletes, students, teachers and researchers, and other income.
The agreement also provides for specific clauses on the elimination of double taxation and non-discrimination. The convention also includes a particular article dealing with exchanging information between the respective tax administrations under internationally accepted standards.
In a note, the General Secretariat of the Brazilian Presidency highlighted that the agreement increases legal certainty and improves the business environment. “Double taxation elimination agreements reflect a balance between the interests of the signatory countries and meet the central purposes of instruments of this nature, which are to eliminate or minimize double taxation of income and to define the tax competence of the contracting countries concerning the different types of income, improving legal security and, thus, the business environment.”
Translated by Elúsio Brasileiro
