Key Benefits:
DECREE NO. 4,012, OF November 13, 2001
Promults the Convention between the Federative Republic of Brazil and the Portuguese Republic Destined to Avoid Double Taxation and Preventing the Tax Evasion in Income Tax on the Throughput, celebrated in Brasilia, on May 16, 2000.
THE PRESIDENT OF THE REPUBLIC, in the use of the attribution that confers the art. 84, inciso VIII, of the Constitution,
Whereas the Federative Republic of Brazil and the Portuguese Republic celebrated, in Brasilia, on May 16, 2000, the Convention Intended To Prevent Double Taxation and to Prevent the Tax Evasion in Income Taxes on the Throughput;
Whereas the National Congress passed this Convention through the Legislative Decree No. 188 of June 8, 2001;
Whereas the Convention entered into force on October 5, 2001, pursuant to paragraph 2 of its Article 28,
DECRETA:
Art. 1º The Convention between the Federative Republic of Brazil and the Portuguese Republic Destined a Avoiding Double Taxation and Preventing Fiscal Evasion in Income Taxes on the Throughput, celebrated in Brasilia, on May 16, 2000, appended by copy to the present Decree, will be executed and fulfilled as entirely as it contains.
Art. 2º shall be subject to the approval of the National Congress any acts that may result in revision of the said Convention, as well as any further adjustments which, pursuant to the art. 49, inciso I, of the Federal Constitution, carries gravy charges or commitments to the national heritage.
Art. 3º This Decree takes effect on the date of its publication.
Brasilia, November 13 of 2001; 180º of the Independence and 113º of the Republic.
FERNANDO HENRIQUE CARDOSO
Gilberto Coutinho Paranhos Velloso
Considering the existing special ties between the two countries and wishing to conclude a Convention aimed at avoiding double taxation and preventing tax evasion on income tax,
Wake up the following:
Chapter I
Scope of Application of the Convention
Article 1º
People Visit
This Convention applies to the resident persons of one or both of the Contracting States.
Article 2º
Visit Taxes
1.The current taxes to which this Convention applies are:
a) in the case of Brazil:
-the Federal Tax on the Income,
(henceforth called the "Brazilian tax");
b) in the case of Portugal:
-the Income Tax of Singular Persons (IRS);
-the Income Tax of Collective Persons (IRC);
-the stroke;
(henceforth called "Portuguese tax").
2.This Convention shall also apply to taxes of an identical or similar nature which shall enter into force thereafter at the date of the signing of the Convention and shall be in addition to the current or substituting them.
The authorities competent States of the Contracting States shall communicate one to the other of the substantial modifications made to their respective tax legislations.
Chapter II
Definitions
Article 3º
General definitions
1.For the purposes of this Convention, unless the context requires different interpretation:
a) the term "Brazil" designates the continental and insular territory of the Federative Republic of Brazil, including its territorial sea, as per defined in the United Nations Convention on the Law of the Sea, and the corresponding sea bed and its subsoil, as well as any maritime area beyond the territorial sea, including the sea bed and its subsoil, to the extent that Brazil, according to with international law, exercise in that area rights relating to the exploitation and use of natural resources;
b) the term "Portugal" designates the territory of the Portuguese Republic located on the European continent, the archipelagos of the Azores and Madeira, the respective territorial sea and thereby any other area where, in accordance with Portuguese legislation and with international law, the Portuguese Republic has sovereign rights or jurisdiction concerning the prospection and the exploration, conservation and management of natural resources, living or not, of the overlying waters to the sea bed and the sea bed and its subsoil;
c) the term "national" means:
i) a natural or physical person who has the nationality of a Contracting State;
ii) a collective or legal person, society of persons or association constituted in accordance with the current legislation in a State Contracting;
iii) an entity which, by not being a collective or legal person, is treated as such, for tax purposes, by the legislation of a Contracting State;
d) the expressions " a State Contracting "and" the other Contracting State "means, in accordance with the context, Brazil or Portugal;
e) the term" person " comprises a natural or physical person, a society or any other grouping of persons;
f) the term "society" means any collective or legal person or any entity deemed to be a collective or legal person for tax purposes;
g) the expressions "Company of a Contracting State" and "company of the other Contracting State" means, respectively, a company operated by a resident of a Contracting State and a company operated by a resident of the other Contracting State;
h) the expression " traffic international " means any transport by ship or aircraft operated by a company whose effective direction is situated in a Contracting State, except if the ship or aircraft are operated only between places situated in the other State Contractor;
i) the expression "competent authority" means:
i) in Brazil: the Minister of State for Finance, the Secretary of the Federal Revenue Officer or his authorised representatives;
ii) in Portugal: the Minister of Finance, the Director General of Taxes or their authorised representatives.
2.With regard to the application of the Convention, at a given point in time, by a Contracting State, any term or expression that it is not defined therein shall have, unless the context requires different interpretation, the meaning assigned to it at that time by the legislation of that State regulating the taxes to which the Convention applies, by prevailing the interpretation resulting from this tax legislation, in the definition of the respective tax effects, on that which decorates with other legislation of this State.
Article 4º
Household Fiscal or Residence
1.For the purposes of this Convention, the expression "resident of a Contracting State" means any person who, by virtue of the legislation of that State, is there subject to tax due to his domicile, his residence, the place of direction or any another criterion of a similar nature, and applies equally to this State and thus to its political or administrative subdivisions or local authorities.
2.Where, by virtue of the provisions of paragraph 1, a natural or physical person is resident of both the Contracting States, the situation shall be resolved as follows:
a) shall be deemed to be resident only in the State in which it has a permanent dwelling at your disposal. If you have a permanent dwelling at your disposal in both states, you will be considered a resident of the State with which your personal and economic relations (vital interests centre) are narrower;
b) if the State in that has the centre of vital interests cannot be determined or if it does not have permanent housing at its disposal in any of the states, it will be considered resident only of the State in which it remains customarily;
c) if remain customarily in both states or if they do not habitually remain in any of them, shall be regarded as resident only of the State of which it is national;
d) if it is national of both States or is not national of none of them, the competent authorities of the Contracting States shall solve the case of common agreement.
3.Where, by virtue of the provisions of paragraph 1, a person, who is not a natural or physical person, is resident of both the Contracting States, he or she shall be considered resident only of the State in which his / her place of direction is situated.
Article 5º
Permanent Establishment or Permanent Establishment
1.For the purposes of this Convention, the expression "stable establishment" or "permanent establishment" means a fixed installation, through which the Company exercises all or part of its activity.
2. The expression "stable establishment" comprises, in particular:
a) a place of direction;
b) a branch office;
c) an office;
d) a factory;
e) a workshop;
f) a mine, an oil or gas well, a quarry, or any natural resource extraction site.
3.A site or construction site or assembly site only constitutes a stable establishment if its duration exceeds nine months.
4.Notwithstanding the previous provisions of this Article, the expression "stable establishment" does not understand:
a) the facilities used solely to store, expose or deliver goods belonging to the company;
b) a deposit of goods belonging to the company, maintained solely for the storing, exposing or delivery;
c) a deposit of goods belonging to the company, maintained solely to be transformed by another company;
d) a fixed installation, maintained solely to purchase goods or gather information for the company;
and) a fixed installation, maintained solely to exercise, for the company, any other preparatory or ancillary character activity;
f) a fixed installation, maintained solely for the exercise of any combination of the activities referred to in points (a) to (e), provided that the installation activity of the facility fixed resulting from this combination be of preparatory or ancillary character.
5.Notwithstanding the provisions of paragraph 1 and 2, when a person-who is not an independent agent, to which paragraph 6-atue is applicable on account of a company and has and habitually exercised in a Contracting State powers to conclude contracts on behalf of company, it will be considered that this company has a stable establishment in that state in respect of any activity that this person exercises for the company, unless the activities of such a person are limited to those indicated in number 4, which, if they were to be exercised through a fixed installation, they would not allow to consider this fixed installation as a stable establishment in accordance with the provisions of that number.
6.It is not considered that a company has a stable establishment in a Contracting State by the mere fact of carrying out its activity in that State through a broker, a commissioner-general or any other independent agent, provided that these people act in the normal scope of their activity.
7.The fact that a resident corporation of a Contracting State controls or is controlled by a resident corporation of the other Contracting State or that exercises its activity in that other State (whether through a stable establishment, or other mode) is not, in and of itself, quite a lot to make of any of these stable establishment societies of the other.
Chapter III
Taxation of the Incomes
Article 6º
Earnings of the Real Estate Estate
1.The income that a resident of a Contracting State auffers from real estate (including the income from the agricultural or forestry holdings) located in the other Contracting State may be taxed in that other State.
2.The expression "real estate" shall have the meaning assigned to it by the right of the Contracting State in which such goods are situated. The expression always comprises the accessories, cattle and equipment of agricultural and forestry holdings, the rights to which the provisions of the private law relating to the property, the usufruct of immovable property and the rights to variable or fixed retributions by the holding or by the granting of the exploitation of mineral deposits, sources and other natural resources. The ships and aircraft are not considered real estate.
3.The provisions of paragraph 1 shall apply to the income derived from direct use, leasing or any other form of use of the real estate.
4.The provisions of heading No. 1 and 3 shall also apply to income from the real estate of a company.
3.The above provisions also apply to income derived from the securities or related services with the real estate which, in accordance with the tax law of the Contracting State in which such goods are situated or the services are provided, be assimilated to the income derived from the real estate.
Article 7º
Profits of Enterprises
1.The profits of a company from a Contracting State may only be taxed in that State, unless the Company exercises its activity in the other Contracting State by means of a stable establishment there. If the company exercises its activity in this way, its profits may be taxed in the other State, but solely to the extent that they are attributable to that stable establishment.
2.With the proviso of paragraph 3, when a company of a Contracting State exercises its activity in the other Contracting State by means of a stable establishment therein, it shall be charged, in each Contracting State, to that establishment stable the profits this would make if it were a separate and separate company that exerted the same activities or similar activities, under the same conditions or in similar conditions, and treated with absolute independence with the company that it is stable establishment.
3.In the determination of the profit of a stable establishment it is permissible to deduct the duly proven expenses that have been made to carry out the purposes pursued by such a stable establishment, including the driving expenses and the general administration expenses equally proven and effectuated with the said end.
4.No profit will be charged to a permanent establishment by the fact of the simple purchase of goods, by that stable establishment, to the company.
5.For the purposes of the preceding paragraphs, the profits to be charged to the stable establishment shall be calculated, in each year, by the same method, unless there are valid and sufficient grounds for proceeding differently.
6.Where profits understand elements of the income specially treated in other Articles of this Convention, the respective provisions will not be affected by the latter Article.
Article 8º
Maritime and Air Navigation
1.Notwithstanding the provisions of paragraphs 1 a to 4 of Article 7, profits from the operation of ships or aircraft in international traffic may only be taxed in the Contracting State in which the effective direction of the Company is situated.
2.Se the effective direction of a shipping company is located on board a ship, the effective direction considers itself situated in the Contracting State where the port is located where that ship is registered, or, in the lack of port of registration, in the Contracting State of which he is a resident of the person who operates the vessel.
3.The provisions of paragraph 1 shall apply equally to profits from participation in a pool, an exploitation in common or an international holding body.
4.When companies from different countries agree to engage in an air transport activity in the form of a consortium, the provisions of paragraph 1 shall apply to the share of profits of a consortium corresponding to the participation held in that consortium by a Resident society of a Contracting State.
Article 9º
Associated Companies
When:
a) a company of a Contracting State participating, directly or indirectly, in the direction, control, or capital of a company of the other Contracting State; or
b) the same persons participate, direct or indirectly, in the direction, in the control or in the capital of a company of a Contracting State and a company of the other Contracting State, and, in both cases, the two companies, in their commercial or financial relations, are connected by conditions accepted or imposed that differ from those that would be established between independent companies, the profits that, if they did not exist these conditions, would have been obtained by one of the companies, but they were not because of those conditions, they may be included in the profits of that company and, consequently, taxed.
Article 10º
Dividends
1.Dividends paid by a resident corporation of a Contracting State to a resident of the other Contracting State may be taxed in that other State.
2.Such dividends may, however, be equally taxed in the Contracting State that it is resident of the corporation that pays the dividends and in accordance with the legislation of that State, but if the effective beneficiary of the dividends is a resident of the other State Contracting, the tax thus established will not exceed:
a) 10% (ten percent) of the gross amount of dividends, if its effective beneficiary is a society that detains, directly, at least 25% percent of the capital of the society that pays the dividends, during an uninterrupted period of 2 (two) years prior to the payment of dividends;
b) 15% (fifteen percent) of the gross amount of dividends, in the remaining cases.
The competent authorities of the Contracting States shall establish, by mutual agreement, how to apply these limits.
3.The term "dividends", used in this Article, means the income from shares, shares or fruition bonds, parts of mines, parts of founders or other rights, with the exception of the credits, which allow to participate in the profits as well as the income derived from other social parties subject to the same tax regime as the income from shares by the State law of which it is resident the society that distributes them. It is further considered that the term "dividends" includes the income derived from account or association in participation.
4.The provisions of heading No. 1 and 2 shall not apply if the effective beneficiary of the dividends, resident of a Contracting State, exercises activity in the other Contracting State of which is resident the society paying the dividends, by means of an establishment stable there situated, and the participation relatively to which dividends are paid is effectively linked to that stable establishment. In this case, the provisions of Article 7º are applicable.
5.Where a resident corporation of a Contracting State obtains profits or income from the other Contracting State, this other State shall not be able to demand any tax on dividends paid by the company, except to the extent that such dividends are paid to a resident of that other state or to the extent that the participation for which dividends are paid is effectively linked to a stable establishment situated in that other state, nor subject the profits not distributed from the company to a tax on undistributed profits, even if dividends paid or undistributed profits consist of, wholly or partially, in profits or income from that other state.
6.Serão also considered dividends the profits remitted or paid or credited by a stable establishment located in a Contracting State to the Company of the other Contracting State to which this belongs, the provisions of paragraph 2 being applicable, point (a).
7.The provisions of heading No. 2 and 6 shall not affect the taxation of the company or the stable establishment in respect of the profits that gave rise to the income mentioned therein.
Article 11º
Juros
1.Interest arising from a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2.However, such interest may also be taxed in the Contracting State of which they originate and in accordance with the legislation of that State, but if the effective beneficiary of the interest is a resident of the other Contracting State, the tax so established will not exceed 15% (fifteen percent) of the gross amount of interest.
The competent authorities of the Contracting States shall establish, by mutual agreement, how to apply this limit.
3.Notwithstanding the provisions of numbers 1 and 2, the interest earned from a Contracting State and paid to the Government of the other Contracting State, to a political or administrative subdivision or local municipality or to any institution (inclusive financial) of exclusive property of that Government or political or administrative subdivision or local municipality shall be exempt from tax in the first State.
4.The limitation set out in paragraph 2 shall not apply to the interest arising from a Contracting State assigned or paid to a stable establishment of a resident of the other Contracting State, located in third State.
5.The term "interest", used in this Article, means the income of the public debt, of bonds with or without a mortgage guarantee and entitled or not to participate in the profits and other claims of any nature, as well as any other income assimilated to the income from importations borrowed by the state tax legislation from which they derive the income.
6.The provisions of paragraph 1 and 2 shall not apply if the effective beneficiary of the interest, resident of a Contracting State, shall engage in activity in the other Contracting State of which the interest is derived, by means of a stable establishment therein, and the credit regarding which interest is paid is effectively linked to this stable establishment. In this case, the provisions of Article 7º are applicable.
7.Interest shall be deemed to arise from a Contracting State when the debtor is a resident of that State. However, where the debtor of interest, whether or not a resident of a Contracting State, has in a Contracting State a stable establishment in respect of which there has been contracted the obligation for which the interest is paid and such establishment stable support the payment of these interest, such interest is considered from the Contracting State in which the stable establishment is situated.
8.When, due to existing special relations between the debtor and the effective beneficiary or between both and any other person, the amount of interest paid, taking into account the credit for which they are paid, exceeds the amount that would be agreed between the debtor and the effective beneficiary in the absence of such relationships, the provisions of this Article shall apply only to the latter amount. In this case, the excess may continue to be taxed in accordance with the legislation of each Contracting State, taking into account the other provisions of this Convention.
Article 12º
Royalties
1.The royalties coming from a Contracting State and whose effective beneficiary is a resident of the other Contracting State may only be taxed in that other State.
2.However, such royalties may also be taxed in the Contracting State from which they originate and in accordance with the legislation of that other State, but, if the effective beneficiary of the royalties is a resident of the other Contracting State, the tax so established will not exceed 15% (fifteen percent) of the gross amount of royalties.
3.The term "royalties", used in this Article, means the retributions of any nature assigned or paid for by the use or by the granting of the use of an author's right on a literary, artistic or scientific work, including the films cinematographic, as well as the films and recordings for transmission by radio or television, of a patent, of a manufacturing or trade mark, of a design, of a plan, of a formula or of a secret process, as well as by the use or by the granting of the use of an industrial, commercial or scientific equipment and by information relating to an experience gained in the industrial, commercial or scientific sector.
4.The provisions of paragraphs 1 and 2 shall not apply if the effective beneficiary of the royalties, resident of a Contracting State, exercises activity in the other Contracting State of which they derive the royalties, by means of a stable establishment therein, and the right or well in respect of which royalties are paid is effectively linked to that stable establishment. In this case, the provisions of Article 7º are applicable.
5.Royalties shall be deemed to arise from a Contracting State when the debtor is a resident of that State. However, where the debtor of the royalties, whether or not a resident of a Contracting State, has in a Contracting State a stable establishment in respect of which there is a contraption of the obligation for which the royalties are paid, and that stable establishment support the payment of these royalties, such royalties are deemed to come from the Contracting State in which the stable establishment is situated.
6.When, due to existing special relations between the debtor and the effective beneficiary of the royalties or between both and any other person, the amount of royalties, taking into account the benefit by which they are paid, exceeds the amount that would be agreed upon between the debtor and the effective beneficiary, in the absence of such relationships, the provisions of this Article shall apply only to the latter amount. In this case, the excess may continue to be taxed in accordance with the legislation of each Contracting State, taking into account the other provisions of this Convention.
Article 13º
Mais-Valias or Capital Gains
1.The gains that a resident of a Contracting State auffers from the disposal of real estate considered in Article 6º and situated in the other Contracting State may be taxed in that other State.
2.The gains from the disposal of securities that form part of the asset of a stable establishment that a company of a Contracting State has in the other Contracting State, including the gains from the disposal of that stable establishment (isolated or with the set of the company), can be taxed in that other state.
3.The gains from the disposal of ships or aircraft used in international traffic, or of the subject goods affecting the operation of such ships or aircraft, can only be taxed in the Contracting State in which the direction is located effective of the company.
4.The gains from the disposal of any other goods or rights miscellable from those mentioned in paragraph 1, 2 and 3 may be taxed in both Contracting States.
Article 14º
Independent Professional Services
1.The income that a resident of a Contracting State obtains by the exercise of a liberal profession or other independent character activities is only taxable in that State, unless such remunerations are paid by a resident of the another Contracting State or kayak to a stable establishment there. In such a case, the yields can be taxed in that other state.
2.The expression "professions" covers, in particular, the independent activities of scientific, literary, artistic, educational, or pedagogical character, as well as the independent activities of doctors, lawyers, engineers, architects, dentists and accountants.
Article 15º
Dependent Professions
1.With the proviso of the provisions of Articles 16, 18º and 19, wages, wages and other similar remuneration obtained from a job by a resident of a Contracting State may only be taxed in that State, unless employment is exercised in the another Contracting State. If the employment is exercised there, the corresponding remunerations can be taxed in that other state.
2.Notwithstanding the provisions of paragraph 1, the remunerations obtained by a resident of a Contracting State from a job exercised in the other Contracting State may only be taxed in the State first mentioned if:
a) the beneficiary stay in the other State for a period or periods not to exceed, in total, 183 days in any period of twelve months with start or term in the tax year concerned;
b) the remunerations are paid by a an employer or on behalf of an employer who is not a resident of the other State; and
c) the remuneration is not borne by a stable establishment that the employer has in the other State.
3.Notwithstanding the previous provisions of this Article, the remuneration of a job exercised on board a ship or an aircraft operated in international traffic, may be taxed in the Contracting State in which the place of direction is located effective of the company.
Article 16º
Direction remunerations
The direction remunerations and other retribution similar received by a resident of a Contracting State in the capacity of a member of the board, the board of directors, the tax council or any other similar body of a resident corporation of the other Contracting State may be taxed in that other state.
Article 17º
Artists and Desportists
1.Notwithstanding the provisions of Articles 14º and 15, the income earned by a resident of a Contracting State in the quality of a spectacle professional, such as theatre artist, film, radio or television, or musician as well as of sportsmanship, coming from your personal activities exercised, in that capacity, in the other Contracting State, may be taxed in that other State.
2.Notwithstanding the provisions of Articles 7, 14º and 15, the income from the activity carried out personally by the practitioners of spectacles or sportsmen, in that capacity, assigned to another person, may be taxed in the Contracting State in which are exerted these activities by the professionals of spectacles or the sportsmen.
3.The provisions of paragraph 1 and 2 shall not apply if the activities carried out in a Contracting State are financed mainly through public funds of the other Contracting State or from one of its political or administrative subdivisions or authorities places or even entities whose social capital is held majority-owned by one of the said persons. In this case, the earned income from these activities can only be taxed in that other state.
Article 18º
Pensions
1.With the proviso of the provisions of Article 19 (2), the pensions and similar remunerations paid to a resident of a Contracting State in consequence of a previous employment may only be taxed in that State.
2.Notwithstanding the provisions of paragraph 1 of this Article, similar pensions and remunerations paid under the legislation relating to the safety or social security of a Contracting State or of one of its political subdivisions can only be taxed in that State.
Article 19º
Public Remunerations
1.The remunerations paid by a Contracting State or by one of its political subdivisions or local authorities, either directly or through funds by them constituted, to a natural or physical person, in consequence of services provided to that State or to that subdivision or municipality, in the exercise of public functions, may be taxed in that State.
2.Notwithstanding the provisions of paragraph 1, remunerations, including pensions, paid for by a Contracting State or by one of its political subdivisions or local authorities, either directly or through funds by them constituted, to a person singular or physical that has the nationality of that State, in consequence of services provided to that State or to that subdivision or municipality, in the exercise of public functions, can only be taxed in that State.
3.The provisions of Articles 15º and 18º shall apply to remuneration and pensions paid in consequence of services provided in relation to a commercial or industrial activity exercised by one of the Contracting States or by one of its political subdivisions or local authorities.
Article 20º
Teachers
A person who is, or has been before, resident of a state Contractor and moving to the other Contracting State, at the invitation of the Government of that other State or non-profit entity or of a university or other educational or scientific research institution, belonging to that State or that entity, with a view solely to teaching or doing scientific research in the so-called institutions, for a period not surplus to two years, is exempt from taxes in both the Contracting States for the remuneration received in consequence of that teaching or research.
Article 21º
Students
1.A person who is, or has been before, a resident of a Contracting State and who remains temporarily in the other Contracting State solely for there to pursue his or her studies or training
a) as a student of a university, high school or school; or
b) as a trainee; or
c) as a grant recipient, pension, award or scholarship granted by a religious, charitable, scientific or educational organization,
will not be taxed in that other state regarding the amounts received to cope with their maintenance, studies or training, as long as they come from sources situated outside of it.
2.Students of a university or other higher education establishment or coach of a Contracting State who have a job in the other Contracting State, for a period not exceeding one year, are not taxable in this other State by the remunerations from such employment, provided that this has the end of its practical training pertains to its studies and provided that the remunerations do not exceed US$ 10,000 (ten thousand US dollars of America) annually.
Article 22º
Other Renditions
1.The elements of the income of a resident of a Contracting State, and wherever they come from, untreated in the previous Articles of this Convention, can only be taxed in that State.
2.The provisions of paragraph 1 shall not apply to income, other than income from real estate as they are defined in Article 6 (2), earned by a resident of a Contracting State which exercises activity in the other Contracting State by means of a stable establishment in it situated, being the right or property in respect of which the yield is paid effectively connected with this stable establishment. In this case, the provisions of Article 7º are applicable.
3.Notwithstanding the provisions of paragraph 1 and 2 of this Article, the elements of the income of a resident of a Contracting State from the other Contracting State and not dealt with in the preceding Articles of this Convention may also be taxed in that another State.
Chapter IV
Provisions to Eliminate Dual Tributes
Article 23º
Method
1.When a resident of a Contracting State obtains income which, in accordance with the provisions of this Convention, may be taxed in the other Contracting State, the first mentioned State shall deduct from the income tax of that resident a importance equal to the income tax paid in that other state.
The deductible importance cannot, however, exceed the fraction of the income tax, calculated before the deduction, corresponding to the income that can be taxed in that other state.
2.In the case of Portugal, when a resident company of Portugal receives dividends from a resident company of Brazil subject to the federal tax on income and not covered by any exemption, where the former directly detains a participation not less than 25% (twenty five per cent), Portugal will allow the deduction of 95% (ninety five per cent) of these dividends included in its taxable base, provided that the said participation was held during the two years precedents, or since the date of the constitution of the Brazilian society, if it occurred thereafter, but in either case solely if participation was held uninterruptedly during that period.
3.In the case of Brazil, when a resident company of Brazil receives dividends from a resident company of Portugal subject to Portuguese tax as defined in paragraph 1 (b) of Article 2º of this Convention and not covered by any exemption, the deduction provided for in paragraph 1 above will take into account the tax required of the corporation on the income from which the dividends paid (indirect credit) originated, observed the provisions of the Brazilian legislation.
4.Where a resident of a Contracting State obtains income which, in accordance with the provisions of this Convention, is exempt from tax in that State, that State may, however, when calculating the quantitative of the tax on other income from that resident, take into account exempt income.
Chapter V
Special provisions
Article 24º
No Discrimination
1.Nationals of a Contracting State shall not be subject in the other Contracting State to any taxation or obligation with it related to them different or more gravous than those to which they are or may be subject to nationals of that other State which find themselves in the same situation.
2.The taxation of a stable establishment that a company of a Contracting State has in the other Contracting State shall not be in that other State less favourable than that of the companies of that other State who carry out the same activities. This provision shall not be construed to obligate a Contracting State to grant to the residents of the other Contracting State the personal deductions, rebates and reductions for tax purposes assigned depending on the civil status or family charges granted to their own residents.
3.Salvo if the provisions of Article 9, Article 11º (8) or No. 6 of Article 12, interest, royalties and other importances paid by a company of a State Contracting to a resident of the other Contracting State shall be deductible, for the purposes of determining the taxable profit of such a company, as if they were paid to a resident of the State first mentioned.
4.Companies of a Contracting State whose capital, wholly or partially, directly or indirectly, is owned or controlled by one or more residents of the other Contracting State shall not be subject, in the State first mentioned, to any taxation or obligation with it related to it different or more gravous than those to which they are or may be subject to the similar undertakings of that first State.
5.Notwithstanding the provisions of Article 2, the provisions of this Article shall apply to taxes of any nature or denomination.
Article 25º
XX_ENCODE_CASE_One friendly procedure
1.Where a resident of a Contracting State considers that the measures taken by a Contracting State or by both Contracting States conduct or be able to conduct, in respect of themselves, a taxation not in accordance with this Convention, may, regardless of the resources established by the national legislation of those States, submit their case to the assessment of the competent authority of the Contracting State of which it is resident.
The application should be filed within two years from the date of the communication of the tax that you have given cause to the claim or, in the case of taxation in the two states, of the second taxation, or, in the case of tax due on the source, of the date of payment of the income that hajam was taxed, even if it deals with the second taxation.
2.That competent authority, if the complaint appears to be founded and is not in a position to give it satisfactory solution, shall endeavour to resolve the matter by means of amicable agreement with the competent authority of the other Contracting State, the to avoid taxation not as per the Convention.
The agreement reached will be applied regardless of the deadlines set out in the domestic law of the Contracting States.
3.The competent authorities of the Contracting States shall endeavour to resolve, through amicable agreement, the difficulties or doubts to which the interpretation or application of the Convention may take place.
4.The competent authorities of the Contracting States will be able to communicate directly with each other in order to agree on the terms indicated in the preceding paragraphs.
Article 26º
Information exchange
1.The competent authorities of the Contracting States shall exchange among themselves the information necessary to implement this Convention or the internal laws of the Contracting States relating to the taxes covered by this Convention, in so far as the taxation in them provided for is not contrary to this Convention, in particular to prevent fraud or evasion of such taxes. The exchange of information is not restricted by the provisions of Article 1º. The information obtained by a Contracting State shall be deemed secret, in the same way as the information obtained on the basis of the domestic legislation of that State, and may only be communicated to persons or authorities (including courts and administrative authorities) in charge of the launch, collection or administration of the taxes covered by this Convention, or of the declarative, executive or punitive procedures relating to these taxes, or the decision of appeals regarding these taxes. Such persons or authorities shall use the information thus obtained only for the purposes referred to. The competent authorities, upon consultation, shall determine the appropriate conditions, methods and techniques for the subjects with respect to which the exchanges of information are carried out, included, when proceeded, the exchanges of information relating to tax evasion.
2.The competent authority of a Contracting State may send to the competent authority of the other Contracting State, regardless of prior request, the information that it posits when:
a) has reason to assume that there have been less tax payment resulting from the artificial transfer of profits within a group of companies;
b) of the use of information previously received from the other Contracting State, new data or background arises that are of usefulness for taxation in that other Contracting State;
c) any other circumstance leads to the assumption of the existence of loss of revenue for the other Contracting State.
3.The competent authority of a Contracting State shall provide the competent authority of the other Contracting State, annually, upon prior identification of the taxpayers, or may provide, even without its prior identification, the following information normally provided by taxpayers:
(a) information relating to the profits obtained in its territory by legal persons or stable establishments located therein, to refer to the competent authority of the State Contractor where the associated legal person or head office or head office or head office;
b) information on the profits declared by legal persons domiciled in the first Contracting State concerning the operations developed in the other Contracting State by associated legal persons or stable establishments;
c) any other type of information that ignits exchange.
4.The competent authority of the required Contracting State may authorize the representatives of the requesting State Contracting State to have access to the first mentioned State for the purposes of providing, in the condition of observers, the respondent of persons and the examination of books and records that are carried out by the requested State.
5.The Contracting States will be able to consult in order to determine the cases and procedures for the simultaneous surveillance of taxes.
It is considered "concurrent surveillance", for the purposes of this Convention, an understanding between the Contracting States to simultaneously scrutinize, each in its territory, the tax situation of a person or persons possessing common or associated interests in order to exchange the relevant information they obtain.
6.The provisions of the preceding paragraphs may never be construed to impose on a Contracting State the obligation:
a) to take administrative measures contrary to its legislation or administrative practice or those of the another Contracting State;
(b) to provide information that cannot be obtained on the basis of its legislation or in the context of its normal administrative practice or those of the other Contracting State;
c) of transmit revealing information of secrets or commercial, industrial or professional processes, or information whose communication is contrary to public order.
7.For the purposes of mutual assistance and reciprocal knowledge in tax policy and tax systems of both the Contracting States, the respective competent authorities will be able to consult each other and promote the exchange of personnel qualified, information, technical studies, and about tax administrative organization.
Article 27º
Members of the Missions Diplomatic and Posts Consultations
The provisions of this Convention shall not prejudice the tax privileges of which they benefit the members of diplomatic missions and consular posts by virtue of general rules of law international or provisions of special agreements.
Chapter VI
Final provisions
Article 28º
Input in Vigor
1.This Convention shall be ratified by the Contracting States in accordance with their respective constitutional requirements and the instruments of ratification shall be exchanged in Lisbon as early as possible.
2.The Convention shall enter into force one month after the exchange of the instruments of ratification and its provisions shall apply, for the first time:
a) in Portugal:
i) to taxes due at the source whose generator fact surges on or after January 1 of year 2000;
ii) to the remaining taxes, in respect of the income produced in the fiscal year starting on or after January 1 of the year 2000;
b) in Brazil:
i) in what concerne to taxes withheld at the source, to the sums paid, remitted or credited on or after the first day of January 2000;
ii) in what concerne the other taxes of which it treats the present Convention, regarding the yields produced in the fiscal year beginning on or after the first day of January of the year 2000.
Article 29º
Denpronunciation
This Convention will be in force while not denounced by one of the Contracting States. Any of the Contracting States may denounce the Convention by diplomatic means by means of a notice specifying the year of termination at least six months before December 31 of the year so specified in the said notice. In this case, the Convention will cease to produce effects:
a) in Portugal:
i) regarding the taxes due at the source whose generator fact arises on or after January 1 of the calendar year following that specified in the said notice;
ii) in respect of the other taxes, in respect of income produced in the fiscal year beginning on or after January 1 of the calendar year following that specified in the said notice.
b) in Brazil:
i) regarding the taxes withheld at the source, the importations paid, remitted or credited to or after the first day of January of the calendar year immediately following that specified in the referred notice;
ii) regarding the other taxes, in regard to the income produced in the fiscal year beginning on or after the first day of January of the calendar year immediately following that specified in the said warning.
In testimony to what, the undersigned, duly authorized for the purpose, sign the present Convention.
Made in Brasília, on May 16, 2000, in two original copies, in the Portuguese language, being both texts being equally authentic.
By the Government of the Federative Republic of Brazil
Luiz Felipe Lampreia
Minister of Foreign Affairs
By the Government of the Portuguese Republic
Joaquim Augusto N. de Pina Moura
Minister of Finance and the Economy
Protocol
At the time of the signing of this Convention between the Federative Republic of Brazil and the Portuguese Republic intended to Prevent Double Taxation and to Prevent Fiscal Evasion in Matter of Income Taxes, the undersigned, duly authorized for the purpose, have agreed on the following additional provisions forming an integral part of the Convention:
1.With reference to Article 2, paragraph 1 (a)
It is understood that, in the taxes targeted in Article 2 (1) (a), the Social Contribution on Net Profit (CSLL), created by Law No. 7,689, is understood to be December 1988.
2.With reference to Article 2, paragraph 3 (b)
It is understood that "stroke" means the additional local over the tax on the income of collective persons.
3.With reference to Article 7, paragraph 3
It is understood that the provisions of Article 7º (3) apply to the expenditure of direction and general administration expenditure carried out in the State in which the stable establishment is situated or in any other place.
4.With reference to Article 11, paragraph 3 and 5
It is understood that the provisions of Article 11º (3) apply only to the interest received by an institution (inclusive financial) of sole ownership of the Government of a State Contractor or of a political or administrative subdivision or local municipality when the said institution is the effective beneficiary of the interest.
It is understood further that, for the purposes of Article 11 (5), interest paid as "remuneration on equity" in accordance with the Brazilian tax legislation are also considered interest.
5.With reference to Article 12, paragraph 3
It is understood that the provisions of Article 12º (3) apply to any kind of payment received on the grounds of the provision of technical assistance and technical services.
6.With reference to Articles 13, 4 and 14, paragraph 1
It is understood that, in the eventuality of, subsequent to the signing of this Convention, Brazil concludes with a third State not situated in Latin America a Convention what limit-with respect to the income referred to in the mentioned paragraphs-the taxing power of the other Contracting State other than the one in which the beneficiary of the income is resident, an identical limitation shall be automatically applied to relations between Brazil and Portugal.
7.With reference to Article 23, paragraph 2
It is understood that, if the method intended to eliminate the economic double taxation of foreign source dividends currently provided for in the Portuguese law comes to be replaced by the method of the indirect credit, the new method will automatically apply to dividends paid by Brazilian resident societies to resident societies of Portugal.
8.With reference to Article 24º
a) It is understood that the provisions of Article 10º (6) do not conflict with the provisions of Article 24º (2).
b) It shall be understood that the provisions of the laws of the States Contractors that do not allow the "royalties", as defined in Article 12 (3), paid for by a stable establishment located in a Contracting State to a resident of the other Contracting State who pursues business activities in the first State Contracting through that stable establishment, be deductible at the time of determining the taxable income of the above-mentioned stable establishment, are not conflicting with the provisions of Article 24º of the present Convention.
c) It is understood that the provisions of Article 24º (4) do not apply to ancillary obligations.
d) It is understood that, in respect of Article 24, it is deemed that the provisions of the Convention shall not are impediments to the application by a Contracting State of their respective internal standards relating to subcapitalization or excessive borrowing.
e) Regarding Brazil, it is understood that Article 24º (5) applies solely to the taxes of the competence of the Union.
9.With reference to the Zones Francas of the Island of Madeira, the Island of Santa Maria and Manaus, to SUDAM and SUDENE
It is understood that the benefits of this Convention will not be assigned to anyone entitled to benefits tax on income tax in accordance with the devices of the legislation and other measures relating to the Zones Francas of the Island of Madeira, the Island of Santa Maria, Manaus, SUDAM and SUDENE or similar benefits to those granted, available or made available under any legislation or other measure adopted by any Contracting State. The competent authorities of the Contracting States shall notify themselves of any legislation or similar measure and shall consult on the similarity, or otherwise, of such benefits.
In testimony to what, the undersigned, duly authorized for the purpose, sign the present Protocol.
Done in Brasilia on May 16, 2000 in two original copies, in the Portuguese language, being both texts being equally authentic.
By the Government of the Federative Republic of Brazil
Luiz Felipe Lampreia
Minister of Foreign Affairs
By the Government of the Portuguese Republic
Joaquim Augusto N. de Pina Moura
Minister of Finance and the Economy
