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The Brazilian Federal Revenue regulates the Mutual Agreement Procedure (MAP) within the International Covenants and Agreements to avoid double taxation

Published on 6 . December . 2016

The so called “friendly procedure”, or mutual agreement procedure (MAP), pursuant to the OCDE’s definition, is a provision customarily present in international agreements to avoid double taxation that grants to the competent authorities of each contracting country the possibility to intervene for the solution of conflicts originating from questionings on the levy or not of taxes under the agreement. Usually, said conflicts involve cases of double taxation, as well as inconsistencies in the interpretation and application of the agreement by one of the countries. According to the RFB, the amicable procedure would be “a specific channel for consultation by taxpayers in the event of measures raised by Brazil or any other signatory country that imply (or may imply) taxation in disagreement with the respective ADT”. Below is an example of a clause of the Brazil and Germany ADT (Decree Nº 76.988, of January 6, 1976):

ARTICLE 26 – Mutual agreement procedure

  1. Where a resident of a Contracting State considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with this Agreement, he may, notwithstanding the remedies provided by the national laws of those States, present his case to the competent authority of the Contracting State of which he is a resident.
  2. The competent authority shall endeavor, if the objection appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with the Agreement.
  3. The competent authorities of the Contracting States shall endeavor to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in the Agreement.

Among the provisions of the IN, the following points, in a free English translation, need to be highlighted:

  1. Only the following taxpayers hold the capacity to file a Claim for the Installation of Amicable Procedures (RIPA), before the RFB: a) the Brazilian resident; b) the Brazilian national; and c) the non-resident of Brazil if, at the time of the disagreement with the measures of the ADT, was a resident (of Brazil);
  2. The amicable procedure is not of a litigious nature, and starts with a unilateral phase, when the RFB receives and implements the internal review of the claim and, if possible, finalizes the procedure, and in the event that the unilateral phase is insufficient, it evolves to the bilateral phase in which the RFB deals with the competent authority of the other Contracting State for the search of a solution to the case;
  3. The RIPA must be submitted to the unit of the RFB of the tax domicile of the claimant, through the utilization of a specific form that will report the actions adopted by the Contracting States in disagreement with the ADT, attaching the supporting documents that evidence the disagreement;
  4. The RIPA must be submitted within the time period set forth in the ADT that will provide the grounds for the claim and within the statute of limitations of the tax(es) in question;
  5. In the event that the tax credit in question may be subject to restitution in Brazil, claimant may submit a request for the restitution of the credit together with the RIPA;
  6. The RIPA covers exclusively  Corporate Income Tax cases (IR), Social Contribution on the Net Profit (CSL) or existing taxes in the other Contracting State covered by the ADT;
  7. In the impossibility of reaching a solution, the RFB will issue a duly substantiated decision, there being no possibility for reconsideration or recourse.

There is yet no information other than those in the text of the IN, but in the next months the RFB may issue new information with respect with the procedure, that is still something new and unprecedented in Brazil.

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ROSMAN, SOUZA LEÃO, FRANCO E ADVOGADOS is a traditional law firm founded in 1964 by José Luiz Bulhões Pedreira (1925-2006) and Antonio Fernando de Bulhões Carvalho (1925-2009) under the name of “Bulhões Pedreira, Bulhões Carvalho e Advogados Associados”. Since its founding, it has practiced actively in multiple areas of the law, with a particular focus on corporate and tax law, as well as providing legal advice to national and international companies, other law firms and government agencies, predominantly in the area of Corporate and Income Tax law. Other significant areas of practice are commercial, administrative, financial and banking law.

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Operating in the principal areas of the law, both in providing legal advice and in litigation, that include corporate, bankruptcy and corporate reorganization, consulting and litigation in civil law, tax, insurance and reinsurance, mediation and arbitration, capital markets, M&A, contracts, real estate, administrative law, intellectual property, the establishment of foreign companies in Brazil, registration of foreign capital before the Central Bank of Brazil, labor law through an associated law firm, the professionals of the firm help clients navigate the complex legal and regulatory universe of Brazil with its own peculiarities but increasingly integrated into the international business community.

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