On October 3rd, 2024, Provisional Measure No. 1,262/2024 and Normative Instruction (IN) No. 2,228/2024 were published, establishing the Additional Social Contribution on Net Income, to adapt Brazilian legislation to the OECD’s Global Rules Against Base Erosion (“GloBE Rules”), as well as other provisions.

The regulation introduces an additional CSLL, so as to establish a minimum global effective tax rate of 15%. This additional tax refers to the Qualified Domestic Minimum Top-up Tax (QDMTT), which is part of the OECD’s Pillar 2 rules.

The release of these rules is yet another measure adopted by the Federal Government to bring Brazilian rules into alignment with the OECD’s international standard. The purpose of minimum taxation is to prevent major companies from being located in jurisdictions where taxation is under 15%, which is detrimental to tax competition between countries.

This surtax will be applied to entities that are part of a multinational group that has earned annual revenues of 750,000,000.00 euros or more in the Consolidated Financial Statements of the Final Investing Entity in at least two of the four tax years immediately preceding the one analyzed.

We highlight the main provisions of the regulations below:

– Introduction of the concepts of group, entity, investing entity, permanent establishment and other terms needed to analyze the standard;

– Rules for applying the rules if an entity is located in more than one jurisdiction;

– The CSLL additional tax is levied on the entity’s exceeding profits, defined under the terms of the MP;

– The GloBE profit or loss will be the accounting net profit or loss for the fiscal year of the entity in its individual financial statements, under the terms of Annex I of the MP;

– The Adjusted Covered Taxes of a Constituent Entity will be equal to the taxes included in the calculation of its Accounting Net Profit or Loss for the fiscal year, adjusted in accordance with Annex II of the MP;

– The Multinational Group’s effective tax rate for the jurisdiction will be equal to the sum of the Adjusted Comprehensive Taxes of each Constituent Entity located in the jurisdiction divided by the jurisdiction’s GloBE Net Income for the tax year;

– The tax will be paid by the last business day of the seventh month following the end of the fiscal year;

– Penalty/fine for not submitting the necessary information or submitting incorrect information is limited to 10% and can reach R$10,000,000.00.

It is important to emphasize that the new legislation may lead to difficulties in its application in specific cases, given that the concepts it contains are different from those already provided for in Brazilian legislation.

Article 3 of the Provisional Measure granted the RFB broad regulatory powers, allowing it to establish definitions of terms and, if necessary, modify them without the requirement for a law, which could result in some legal uncertainty on the matter.

We stress that the Provisional Measure has 120 days to be converted into law by the National Congress, otherwise it will lose its effectiveness.

The professionals in the Tax Department of Castro Barros Advogados are at your disposal to provide any further clarification on the subject.