On June 14, 2021, SWISSCAM held together with the Swiss Business Hub the webinar with record attendance on the agreement between Brazil and Switzerland to eliminate double taxation.
With opening and moderation by the Vice President of SWISSCAM, Mr. Flavio Silva, the purpose of the event was to present some news that this agreement brings both in the scope of the taxation of companies and individuals operating in both countries.
The Swiss Ambassador to Brazil, Mr. Andrea Semadeni, recalled the trajectory of the ratification process of the agreement since his arrival in the country in 2018, when the agreement was signed, until its promulgation by the President of the Republic in June 2021.
In Switzerland, this process took only one year, having been completed in 2019. At this point, the Ambassador was surprised to learn that in Brazil the document had not even left the Internal Revenue Service, where it had been signed. After his intervention, a day later the process was sent to the Civil House.
The meeting organized by SWISSCAM in May 2019 at Nestlé’s headquarters between representatives of Swiss companies and the Ambassador helped him to better understand how the system works and how important this agreement was for the business of Swiss companies in Brazil.
Through a personal contact in the Chamber of Deputies, he was informed of the various stages that the process should go through first in the Chamber, completed in March 2020, and then in the Senate, hampered by the pandemic situation. In October 2020, the Ambassador got in touch with colleagues from Singapore and the United Arab Emirates who were also with the agreements at the same stage and joined forces, with the help of a lobbyist, until finally being approved in 2021.
Mr. Andrea Semadeni considers this agreement a great success at the end of these 4 years of efforts and that it will bring more legal certainty to the companies.
Mr. Cassio Sztokfisz, Partner at the associated firm Schneider, Pugliese, Sztokfisz, Figueiredo and Carvalho Sociedade de Advogados, took the floor to talk about the practical and relevant aspects of the agreement. Given the diversity of the audience, he sought to address the topic in a more comprehensive way so that everyone could have an idea of what the treaty contemplates and its possible benefits.
The main benefits mentioned are the resolution of conflicts of double residence, the limitation of tax rates at source and the possibility of offsetting the tax paid abroad.
Cassio provided guidance on who can avail of the benefits brought by this convention, the criteria for defining the residence of the individual or legal entity, including the issue of permanent establishment.
Each category of income was explored, including the article on corporate profits (art. 7), one of the most controversial of the conventions signed by Brazil.
Cassio informed that this is the first Brazilian convention to have a specific provision for technical services and it is of great importance as many Swiss companies perform technical services in Brazil, and will be able to enjoy a 10% rate instead of the usual 15% in Brazil.
The mechanisms that each country will adopt to eliminate double taxation were also clarified in his presentation. As a general rule, Brazil uses the credit method and Switzerland uses the exemption method. There are important exceptions in this rule for dividends, interest, royalties and technical services, where Switzerland will adopt the credit method.
Other topics covered were non-discrimination, information exchange and LOB Clauses. To access the full presentation, go to the member’s area of our website.
Finally, Mr. Andrea Semadeni bids farewell to Brazil and introduced the name of the new Swiss Ambassador to Brazil, who will soon take over, Mr. Pietro Lazzeri. Mr. Philippe Praz, Director of the Swiss Business Hub, also bids farewell and introduced his successor, Mr. Hans Aebi.