Brazil: Tax authority issues a ruling on tax rates for reinsurers

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The tax authority of Brazil has issued COSIT Consultation Response no. 62/2017 (Solução de Consulta n. 62/2017) setting out views of the General Office to Coordinate Taxation (COSIT) on tax rates applicable to reinsurers.

The Consultation Response covers some  controversial points of legislation, such as the classification, for fiscal purposes, of the activity of reinsurance as the provision of a service; and classification of a representative office of a reinsurer as a permanent establishment in Brazil.

The COSIT considers that reinsurers are subject to the same rules as insurance companies so local reinsurers incorporated in Brazil are subject to the corporate income tax (IRPJ) and the social contribution on net income (CSLL), both calculated under the actual profit method and imposed at a combined rate of 45%. The Consultation Response also clarifies that the gross revenue of reinsurers is subject to welfare contributions at a rate of 0.65% for the PIS/Pasep and a rate of 4% for COFINS.

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