Tax

National Congress approves Legislative Decree to avoid double taxation between Brazil and Norway

National Congress approves Legislative Decree to avoid double taxation between Brazil and Norway

On December 24, 2024, Legislative Decree No. 273 was published, formalizing the terms of the Convention signed on November 4, 2022, between Brazil and Norway.

This agreement replaces the previous 1981 treaty, aiming to eliminate double taxation on income and prevent tax evasion and avoidance. It introduces detailed provisions regarding technical services, capital gains, business profits, royalties, interest, and dividends, establishing specific tax limits and strengthening fiscal cooperation between the two countries.

 Key Changes

(i) Dividends: Dividends paid by a company resident in one Contracting State to a resident of the other Contracting State may be taxed in the latter. However, they may also be taxed in the source State, with specific limits: 10% of the gross amount if the beneficial owner holds at least 25% of the paying company’s capital for at least 365 days before payment, or 15% in all other cases.

(ii) Interest: Interest arising in one Contracting State and paid to a resident of the other may be taxed in both States. However, taxes will be limited to 10% of the gross amount for long-term loans granted to finance equipment or investment projects, or 15% in other cases.

(iii) Royalties: Royalties arising in one Contracting State and paid to a resident of the other may be taxed in both States. However, taxes will be limited to 15% for trademarks and 10% for other cases.

(iv) Technical Services: Remuneration for technical services will be taxable in both Contracting States, but capped at 10% of the gross amount for beneficial owners residing in the other Contracting State.

(v) Capital Gains: Gains from the alienation of shares in companies whose assets consist primarily of real estate located in the other Contracting State may be taxed in that other State.

(vi) Ships and Aircraft: Gains from the alienation of ships or aircraft operated in international traffic, or movable property allocated to such operations, will be taxed exclusively in the company’s State of residence.

(vii) Directors’ Fees: Fees received by directors or similar officers of companies located in the other Contracting State may be taxed in that other State.

(viii) Natural Resource Exploration: Profits from companies engaged in transporting supplies, personnel, or operating auxiliary vessels for natural resource exploration activities will be taxed exclusively in the company’s State of residence.

(ix) Additional Aspects The Convention ensures that taxes cannot exceed international standards, such as those recommended by the OECD. Additionally, if Brazil signs an agreement with another OECD country to reduce or exempt income tax, such exemption will automatically apply to Norway.

Future adjustments affecting national assets will require National Congress approval.

The Tax Department at Castro Barros Advogados is available to address any questions or provide support regarding this matter.