Provisional Measure n. 563/2012

According to article 22 of Law 9,430/96, Brazilian borrowers can only deduct, for Corporate Income Tax purposes, a maximum interest expense corresponding to the 6 month LIBOR rate on US dollar deposits plus an annual spread of 3% (three percent) paid to a non-resident related party.

However, such does not apply in case the contract is registered with the Central Bank of Brazil (Bacen). In this case the interest rates registered with the Bacen are admitted for Brazilian tax purposes even if the rate exceeds the LIBOR plus 3% margin.

Provisional Measure 563 of April 3, 2012 changes that rule as of January 1st, 2013, as the maximum deductible rate would be the LIBOR plus a percentage to be published annually by the Ministry of Finance based on market average. This would be the maximum deductible rate even for contracts dully registered with the Bacen.
Please note that a Provisional Measure is an “act” issued by the President, with the authority of law until approved by Congress (which must occur within a 120-day period). If Congress does not approve the Provisional Measure within the 120-day period, the provision is no longer effective.

These being the comments we deemed proper for the moment, we are at your entire disposal for any clarification you may need.

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