Brazil’s tax authority has issued a ruling to a taxpayer reflecting a change of position concerning cross-border cost reimbursement arrangements.
Traditionally, the tax authority (Receita Federal do Brazil—RFB) has imposed a high tax burden of multiple taxes—with rates ranging between approximately 40% to 42%—and has denied the deductibility of payments related to cost reimbursement arrangements. There are no specific domestic tax regulations in relation to these arrangements.
Following a formal consultation request filed by a taxpayer, the RFB has recently issued a ruling that a cross-border cost reimbursement arrangement would be acceptable for a reduction in taxes, provided the reimbursement is based on reasonable and objective criteria. The RFB would also look for other factors including the existence of written contracts.
