Finland - Brazil Treaty Development - Details
The IBFD has received the English text of the income tax treaty of 2 April 1996 between Finland and Brazil. Once in force, this treaty will replace the present treaty of 16 February 1972, as modified by the protocol of 12 June 1989. The treaty was concluded in the Finnish, Portuguese and English languages; in the case of divergence of interpretation, the English text prevails. The treaty generally follows the OECD Model Convention.
Dividends paid by a Finnish company to a resident of Brazil are not subject to withholding tax in Finland so long as an individual resident in Finland is entitled to the imputation credit in Finland, which is presently the case. For Brazil, the maximum withholding tax on dividends is 10%. Brazil may also levy a branch profits tax, which may not exceed 10%.
The maximum withholding tax rate on interest is 15%. The usual exemptions for interest paid to public bodies, etc. apply. The maximum withholding tax on royalties is 10% if paid for copyrights, including films and tapes, 25% on trade marks and 15% otherwise.
A building site or construction or installation project constitutes a permanent establishment if it lasts more than 6 months.
In general, both states will use the credit method to eliminate double taxation. Brazilian-source dividends are exempt in Finland if the shareholder is a company that controls directly at least 10% of the voting power in the company paying the dividends. Finland will grant a tax sparing credit of 15% for dividends and 25% for interest and royalties.
According to the additional protocol, the withholding tax rates and tax sparing credits mentioned above are valid for the first 10 years for which the treaty is effective.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Carlos S Romero, Deloitte Touche Tohmatsu, Sao Paulo, Brazil on Tel: +55 11 257 0122, Fax: +55 11 258 8456