Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Brazil

Brazil has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) and no recommendations are made. Brazil has implemented amendments to the process for granting rulings, which requires taxpayers to submit the information necessary for ensuring that all relevant related parties are identified. Brazil also affirms that when issuing future rulings it will provide them in a timely manner to the competent authority for exchange in accordance with the transparency framework requirements.

Brazil can legally issue two types of rulings within the scope of the transparency framework.

In practice, Brazil has issued ten past rulings; for the period 1 April 2016 - 31 December 2016; and for the year in review, Brazil issued no future rulings within the scope of the transparency framework.

No peer input was received in respect of the exchanges of information on rulings received from Brazil.

Introduction

140.  This peer review covers Brazil’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

141.  Brazil can legally issue the two following types of rulings within the scope of the transparency framework: (i) rulings related to preferential regimes1 and (ii) cross-border unilateral advance pricing arrangement (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles. In Brazil, rulings are currently issued by the General Coordination of Taxation, an office of RFB. Since 2013, rulings are published on the Receita Federal do Brazil (“RFB”)’s website in a redacted form.2

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

142.  For Brazil, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

143.  In the prior year peer review report, it was determined that RFB’s undertakings to identify past rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. RFB’s implementation in this regard remains unchanged and therefore continues to meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

144.  For Brazil, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

145.  In the prior year peer review report, it was determined that RFB’s undertakings to identify future rulings were sufficient to meet the minimum standard. The prior year peer review report noted that it was necessary to make use of the “best efforts approach” to collect information on all potential exchange jurisdictions. Since all the necessary information was collected, the RFB’s process for identifying the rulings and potential exchange jurisdictions was sufficient to meet the minimum standard. In the year in review, Brazil has implemented amendments to the process for granting rulings, which requires taxpayers to submit the information necessary for ensuring that all related parties to a taxpayer are identified in accordance with the transparency framework. In addition, RFB informs to taxpayers that the summary of the ruling will be exchanged with the tax administration of the related parties’ countries, among others changes aiming to facilitate the identification of the rulings in the scope of the minimum standard.3 RFB’s implementation meets the minimum standard.

Review and supervision mechanism (ToR I.4.3)

146.  In the prior year peer review report, it was determined that RFB’s review and supervisions mechanisms were sufficient to meet the minimum standard. RFB affirms that the amendments to the process for granting rulings helped on the identification of the relevant tax administration with whom to exchange information. RFB’s implementation continues to meet the minimum standard.

Conclusion on section A

147.  Brazil has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

148.  Brazil has the necessary domestic legal basis to exchange information spontaneously. Brazil notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

149.  Brazil is a party to international agreements permitting spontaneous exchange of information, including the (i) Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”) and (ii) Double Tax Agreements with 33 jurisdictions.

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

150.  In the prior year peer review report, it was determined that RFB’s completion and exchange of templates were sufficient to meet the minimum standard. RFB’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard. Furthermore, Brazil has confirmed that their approach to the completion of the summary section in section 7 of Annex C of the Action 5 Report (OECD, 2015) conforms with the internal FHTP suggested guidance to the section.

151.  As no rulings within the scope of the transparency framework have been issued during the year in review and Brazil has exchanged all its past rulings in 2016, including exchanges with all relevant members of the Inclusive Framework, Brazil was not required to complete any exchanges of information and there is no data to report on the timeliness of exchanges. Brazil has not identified any other past rulings to be exchanged during the year in review.

152.  Brazil affirms it is aware that when rulings are issued in the future they have to be identified and then timely provided to the competent authority to meet the transparency framework requirements.

Conclusion on section B

153.  Brazil has the necessary legal basis for spontaneous exchange of information on rulings. Brazil has met all of the ToR for the exchange of information process that can be met in the absence of rulings being issued and exchanged in practice for the year in review and no recommendations are made.

C. Statistics (ToR IV)

154.  As there were no rulings required to be exchanged by Brazil for the year in review, no statistics can be reported.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

155.  Brazil does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015) were imposed.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
	No recommendations are made

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  With respect to the following preferential regime: PADIS – Semiconductors Industry.

← 2.  Available at: https://idg.receita.fazenda.gov.br/acesso-rapido/legislacao (accessed 20 November 2018).

← 3.  See Article 3-A of the Normative Instruction No. 1396/2013, available at: http://normas.receita.fazenda.gov.br/sijut2consulta/link.action?visao=anotado&idAto=46030 (accessed 20 November 2018).