In May of this year, Brazil signed two new tax treaties: one with Singapore and one with Switzerland.
The Swiss treaty has been in the drafting process since 2015 when Swiss foreign affairs officials expressed concern about Brazil's categorization of some Swiss tax structures as Privileged Tax Regimes. According to Brazilian authorities, Privileged Tax Regimes are included on the "grey list" - a list that is reserved for countries with effective tax rates lower than Brazil's 20 percent limit.
As for Singapore, in December 2017, Brazil placed certain Singaporean tax regimes on its "grey list". Previously, such regimes were on the Low Tax Jurisdiction List known as the "black list". Although Singapore's famous concessionary tax rates are attractive to Brazilian investors, Brazilians need to be cautious as Singapore's tax incentives for shipping, trading, and aviation are still categorized as Privileged Tax Regimes.
Brazil's Privileged Tax Regime category makes certain entities subject to stricter thin capitalization rules as well as mandatory transfer pricing rules. The new treaties seek to help current foreign investors by eliminating double taxation and incentivize new investors with tax benefits.
Both the treaty with Singapore and the treaty with Switzerland contain an identical new Article 13, which explains the fee structures for technical services. This article moves the taxing of technical services from the "business profits" to the "royalties" category. This is beneficial to Brazil since royalty provisions for Brazilian tax treaties are source-oriented, typically with a 10-15% withholding tax rate.
The Singapore treaty also includes an article (Article 27) on the exchange of information (EOI). Brazil signed a separate treaty with Switzerland concerning EOI in connection with the collection and execution of tax credits.
It seems there is an effort on the part of the Brazilian government to promote foreign investment by entering into bilateral double taxation treaties. The big question now is whether Brazil will entice the US to join along. Currently, there is no double taxation treaty between the US and Brazil.
