A deemed tax credit of 9% under CFC rules for Brazilian companies with foreign investment in some predefined industrial sector has been extended by a recent guidance.
The deemed tax credit results in the lower taxation of profits earned abroad by companies in eligible industry sectors.
A major change to Brazil’s CFC rules has been introduced by Law 12,973 which was published in 14 may 2014. Deemed credit of up to 9% allowed on Brazilian companies with foreign investments in the beverage, food, and construction sectors. That will allow a credit to offset the amount of income tax due in relation to the CFC profits (profits earned abroad) and to be considered in computing the Brazilian company’s taxable income in Brazil. This deemed credit benefit will be available until 2022. The authority to the executive branch to expand the list of activities involving foreign investment that may benefit from the deemed or presumed credit has been provided by Law12,973.
The presumed credit of 9% was extended by Ordinance 427 to Brazilian companies with foreign investments in the following sectors: (1) the processing industry; (2) extraction of minerals; and (3) exports under a concession regime, placed in the country where the subsidiary is domiciled.
