Brazil now allows countries to seek exclusion from being classified as offering favorable taxation or a privileged tax regime if they make significant investments in Brazil, helping national development, starting 18 October 2024, issued in Decree No. 12.226 of 18 October 2024  in the Official Gazette.

The Decree regulates the provisions of Article 24-C of Law No. 9,430 of 27 December 1996, which addresses the criteria for qualifying a country or dependency with favored taxation or a privileged tax regime provided for, respectively, in Articles 24 and 24-A of the same law.

The classification is applied in the context of Brazil’s newly introduced transfer pricing framework. This Decree regulates the provisions of Article 24-C of Law No. 9,430 of 27 December 1996, which authorises the exceptional exclusion of the qualification of country or dependency with favored taxation or privileged tax regime provided in Article 24 and Article 24-A  of the same law, which results exclusively from the non-taxation of income at the maximum rate of 17% for countries that significantly promote national development through significant investments in Brazil.

To qualify for the exclusion, investments must be made directly by the government of the respective country, its sovereign wealth funds, or its publicly controlled companies where the government holds majority ownership. Investments can be directed towards securities issued by the Brazilian government or into the capital of Brazilian companies or investment funds.

Investments should be committed for at least five years, specifying annual amounts, and aligned with the Gross Domestic Product of the investing country.

The exclusion will continue to apply as long as the investment in Brazil is maintained.