Originally published in the February 16 edition of World Tax Daily (Copyrights Tax Analysts)
Brazil’s full Chamber of Deputies on February 11 approved Legislative Decree Project (Projeto de Decreto Legislativo, or PDC) 413/2007, which introduces into Brazil’s legal system the tax information exchange agreement signed by Brazil and the United States in Brasilia on March 20, 2007.
PDC 413/2007 was fiercely opposed at the House Commission of Constitution and Justice where questions arose regarding the constitutionality of the agreement and its impact on Brazilian companies. Some commission members argued that the agreement would violate Brazil’s sovereignty principle and should thus be rejected as unconstitutional.
The TIEA will now go before the Senate for review and approval. Debate at the Senate will be difficult, not only because of the agreement’s controversial provisions but also because the executive branch does not have a guaranteed majority in the Senate, and general elections will take place by the end of the year.
The TIEA provides for the exchange of information regarding a series of taxes in both countries. For the U.S., the taxes are federal income taxes, federal taxes on self-employment income, federal estate and gift taxes, and federal excise taxes.
For Brazil, the agreement covers the following taxes:
- individual (IRPF) and corporate (IRPJ) income tax;
- industrialized products tax (federal excise tax, or IPI);
- financial transactions tax (IOF);
- rural property tax (ITR);
- Program for Social Integration contribution (P.I.S.);
- Social Contribution for the Financing of Social Security (COFINS); and
- Contribution for the Financing of Social Security (CSL).
David Roberto R. Soares da Silva