RFB has issued guidance on deducting taxes paid abroad by subsidiaries and affiliates, clarifying how Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) owed in Brazil can be offset.

The Brazilian Federal Revenue Service (RFB) has issued Interpretative Declaratory Act RFB No. 1 of 22 January 2026, published in the Official Gazette (DOU) on 23 January 2026, providing guidance on the deduction of foreign taxes paid by subsidiaries and affiliated companies.

The act addresses how Brazilian parent companies or affiliates may deduct Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) paid abroad by directly or indirectly controlled subsidiaries or affiliates when calculating their domestic tax liabilities.

Key provisions of RFB No. 1/2026

  • Deduction scope: Only foreign taxes paid by a subsidiary or affiliate may be deducted from IRPJ and CSLL owed by the Brazilian parent company or affiliate. The deduction applies proportionally to the profits earned abroad by the foreign entity.
  • Prohibited applications:
    • Offsetting foreign taxes in the manner described in Article 74 of Law No. 9,430/1996.
    • Deducting or offsetting against IRPJ and CSLL monthly estimates.
  • Limits and carryover:
    • The deduction cannot exceed the IRPJ and CSLL owed by the parent or affiliate in the assessment period.
    • If the allowable deduction is limited by prior period tax loss offsets, the difference cannot generate a negative IRPJ balance and must be recorded in Part B of LALUR (Book of Taxable Income) for use in future periods.
    • The same rule applies for the formation of a negative CSLL balance.

The act aims to provide clarity and legal certainty for Brazilian taxpayers operating in multiple jurisdictions, ensuring compliance with domestic tax laws while allowing the legitimate deduction of foreign taxes.

The guidance was issued by the Special Secretary of the Federal Revenue of Brazil, exercising powers under Article 350, caput, item III, of the Internal Regulations of the Special Secretariat of the Federal Revenue, approved by Ministry of Economy Ordinance No. 284 of 27 July 2020. It also aligns with Article 74 of Law No. 9,430/1996, Article 87 of Law No. 12,973/2014, and Normative Instruction No. 1,520/2014.