Brazil has issued confirmation that there is no withholding tax on payments for technical services and technical assistance under the double tax treaty between Brazil and France. Private Letter Ruling 153/2015 on the interpretation and application of the Brazil-France treaty was published on 1 July 2015.

Payments made from Brazil to French resident individuals or entities in relation to technical services or technical assistance, whether or not a transfer of technology takes place, are not subject to withholding tax. Under the business profits article (Article 7) of the Brazil-France tax treaty the profits of a French enterprise are only taxable in the country of residence unless there is a permanent establishment of the French enterprise in Brazil. This also applies to payments for technical services or technical assistance as these are regarded as a part of business profits under the treaty and do not come within the definition of royalties for withholding tax purposes.

Currently the Brazilian authorities consider that payments for these items come within the definition of royalties if a corresponding protocol establishes that technical services and technical assistance are to be treated in the same way as royalties for tax purposes. However there is no protocol to this effect in the case of the Brazil-France treaty.

These payments would be dealt with under provisions for independent professional services and independent workers if the technical services or assistance require the services of skilled persons, but only where the tax treaty provisions allow this.

In other cases the payments for technical services and technical assistance are dealt with under the business profits article, as in the Brazil-France treaty. As this ruling is binding on the Brazilian tax authorities it is relevant to any other taxpayer that may be making these types of payment between Brazil and France.