Brazil joins the list of countries, such as Uruguay and Singapore, to apply the Global Tax, required by OECD. So, on the 3rd of October 2024, the Provisional Measure No. 1,262/2024 was published, introducing an Additional Contribution on Net Income (CSLL). This measure aims to align Brazilian tax legislation with the global rules against the erosion of the tax base on corporate profits (GloBE Rules), established under the OECD and G20’s Base Erosion and Profit Shifting (BEPS) initiative. The goal is to counter aggressive tax planning by ensuring a global minimum taxation of 15% for multinational groups with revenues exceeding 750 million euros in at least two of the last four fiscal years considered.  

The application of the OECD tax 

The implementation of this supranational framework ensures that multinational companies in Brazil will pay a minimum of 15% in taxes on their profits, even when operating in low-tax jurisdictions or tax havens. Although the Brazilian tax burden is high, reaching up to 34% of corporate profits, certain situations in Brazil allow tax incentives and special regimes to significantly reduce the effective tax rate on profits. In such cases, effective taxation for certain multinational enterprises can be as low as below 15%, a threshold that invokes the compensatory mechanism enshrined in Provisional Measure 1,262/2024. This measure ensures that the additional tax is collected by the Brazilian treasury, thereby preventing the “export” of this tax revenue to one of the more than 140 jurisdictions that are part of the EPS Inclusive Framework. 

The Provisional Measure is organised around two main topics, referred to as Titles. The Title I addresses the Minimum Taxation on Profits for large companies, introducing the Additional CSLL for multinational groups with annual revenues exceeding 750 million euros. This additional tax seeks to align the effective tax rate with the 15% threshold through the calculation of excess profits and adjusted taxes. Title II, in turn, encompasses complementary provisions, such as the exclusion of countries from the list of low-tax jurisdictions with a view to encouraging significant foreign investment in Brazil. 

Where did this measure come from? 

The implementation of the Additional CSLL also aligns with the GloBE Rules guidelines. Mechanisms such as the Income Inclusion Rule (IIR) and the Undertaxed Payment Rule (UTPR) ensure that the undertaxed profits of multinational groups are duly taxed, regardless of the jurisdiction in which the company is established. By adopting the Additional CSLL as a Qualified Domestic Minimum Top-up Tax (QDMTT), Brazil ensures priority in collecting these taxes. In this way, the State strengthens fiscal sovereignty, increases tax revenue, and aligns with international standards on the subject in Brazil. 

The government estimates that this measure could result in significant additional tax revenue: R$ 3.44 billion in 2026, R$ 7.28 billion in 2027, and R$ 7.69 billion in 2028.  

Auxadi keeps abreast of the latest tax developments in the more than 50 countries in which it operates. Therefore, if you need help in managing your company’s tax payments in Brazil and other jurisdictions, do not hesitate to contact us. 

Can Auxadi help?

Auxadi can become your ideal partner. We offer a one stop shop value added outsourcing services in the areas of accounting and reporting, tax compliance, payroll management and representation services, among others.

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