On May 23, 2018, Law 27441 was published in the Official Gazette, thus approving the Amendment Protocol to the Treaty to Avoid Double Taxation and Prevent Tax Evasion between Brazil and Argentina (the “Protocol”). This Protocol has not been ratified yet by the Brazilian Congress.
The treaty executed in 1980, currently in force, establishes that dividends distributed by a Brazilian company to Argentine taxpayers as well as interests from Brazilian corporate bonds are exempted from the local Income Tax. The Protocol allows both Argentina and Brazil to levy a tax on both income, although it is subject to a cap on withholdings applied by the source country.
In this regard, the Protocol includes maximum withholding rates from 10 to 15% for payment of dividends, interests and royalties, as the case may be. In consequence, Argentina will no longer apply the local 35% rate for payment of interests or 31.5% for the payment of royalties and services to Brazilian taxpayers; while Brazil´s legislation generally provides for rates at 15%.
The Protocol has not been ratified by the Brazilian Congress yet. Once the ratification instruments are exchanged by diplomatic means, the Protocol will become effective 30 days after the last notice and will be applicable for the fiscal year following the entry into force.
For more information related to the main amendments introduced by the Protocol, please click on the following article Amendment to the Treaty to Avoid Double Taxation and Prevent Tax Evasion between Argentina and Brazil.