Double Tax Treaty Brazil X Portugal

Date of Conclusion: 16 May 2000

Effetive Date: 1 January 2000

 

CONVENTION BETWEEN THE FEDERATIVE REPUBLIC OF BRAZIL AND THE PORTUGUESE REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

 

The Federative Republic of Brazil

and

The Portuguese Republic,

 

Considering the special link between both countries and desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income,

Have agreed as follows:

CHAPTER I
Scope of the Convention

Article 1
Personal scope

This Convention shall apply to persons who are residents of one or both of the Contracting States.

Article 2
Taxes covered

1. The existing taxes to which this Convention shall apply are:

a) in the case of Brazil:

– the federal income tax

(hereinafter referred to as “Brazilian tax”);

b) in the case of Portugal:

– the individual income tax (“IRS – imposto sobre o rendimento das pessoas singulares”);

– the Corporate income tax (“IRC – imposto sobre o rendimento das pessoas coletivas”);

– the IRC surchage (“derrama”);

(hereinafter referred to as “Portuguese tax”).

2. This Convention shall also apply to any identical or substantially similar taxes that are imposed after the date of signature of this Convention in addition to, or in place of, the existing taxes.

The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their respective taxation laws.

CHAPTER II
Definitions

Article 3
General definitions

1. For the purposes of this Convention, unless the context otherwise requires:

a) the term “Brazil” means the continental and insular territory of the Federative Republic of Brazil, including its territorial sea, as defined in accordance with the United Nations Convention on the Law of the Sea, and the corresponding seabed and subsoil, as well as any maritime area beyond the territorial sea, including the seabed and the subsoil, to the extent that Brazil exercises sovereign rights in such an area with respect to the exploration and exploitation of the natural resources in accordance with international law;

b) the term Portugal means the territory of the Portuguese Republic situated in the European continent, the archipelagoes of Azores and Madeira, the respective territorial sea, and any other zone in which, in accordance with the laws of Portugal and international law, the Portuguese Republic has sovereign rights or jurisdiction with respect to the exploration and exploitation, the preservation and management of the natural living and non-living resources of the seabed and subsoil and of the superjacent waters;

c) the term “national” means:

i) an individual possessing the nationality of a Contracting State;

ii) a legal person, partnership or association deriving its status as such from the laws in force in a Contracting State;

iii) an entity which, not being a body Corporate or a legal person, is treated as a legal person under the laws of a Contracting State;

d) the terms “a Contracting State” and “the other Contracting State” mean Brazil or Portugal, as the context requires;

e) the term “person” includes an individual, a company and any other body of persons;

f) the term “company” means any body Corporate or any entity that is treated as a body Corporate for tax purposes;

g) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

h) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise that has its place of effective management in a Contracting State, except when such ship or aircraft is operated solely between places in the other Contracting State;

i) the term “competent authority” means:

i) in Brazil: the Minister of Finance, the Secretary of Federal Revenue or their authorized representatives;

ii) in Portugal: the minister of Finance, the Director General of Taxes or their authorized representatives.

2. As regards the application of the Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

Article 4
Fiscal domicile or residence

1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes that State as well as its political or administrative subdivisions and local authorities.

2. Where by reason of the provisions of paragraph l an individual is a resident of both Contracting States, then his status shall be determined as follows:

a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him. If he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (center of vital interests);

b) if the State in which he has his center of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;

c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;

d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph l a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.

Article 5
Permanent establishment

1. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially:

a) a place of management;

b) a branch;

c) an office;

d) a factory;

e) a workshop;

f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

3. A building site or construction or assembly project constitutes a permanent establishment only if it lasts more than nine months.

4. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:

a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;

e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;

f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs “a” to “e”, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person – other than an agent of an independent status to whom paragraph 6 applies – is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such a person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

6. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.

7. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

CHAPTER III
Taxation Income

Article 6
Income from immovable property

1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

2. The term “immovable property” shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 shall also apply to income derived from the direct use, letting, or use in any other form of immovable property.

4. The provisions of paragraphs 1 to 3 shall also apply to the income from immovable property of an enterprise.

5. The foregoing provisions shall also apply to income from movable property or from services performed in connection with immovable property which, under the tax law of the Contracting State in which such property is situated or the services are performed, is assimilated to income from immovable property.

Article 7
Business profits

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses, duly substantiated, which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses, also duly substantiated, so incurred.

4. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of merchandise for the enterprise.

5. For the purposes of the preceding paragraphs the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

6. Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8
Shipping and air transport

1. Notwithstanding the provisions of paragraphs 1 to 4 of Article 7, profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

2. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbor of the ship is situated, or, if there is no such home harbor, in the Contracting State of which the operator of the ship is a resident.

3. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

4. Where companies from different countries have agreed to operate means of air transport through a business consortium, the provisions of paragraph 1 shall apply only to such proportion of the profits of the consortium as corresponds to the participation held in that consortium by a company which is a resident of a Contracting State.

Article 9
Associated enterprises

Where:

a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State, and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

Article 10
Dividends

1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but, if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

a) 10 percent of the gross amount of the dividends if the beneficial owner is a company which, for an uninterrupted period of two years prior to the payment of the dividends, holds directly at least 25 percent of the capital of the company paying the dividends;

b) 15 percent of the gross amount of the dividends in all other cases.

The competent authorities of the Contracting States shall settle, by mutual agreement, the mode of application of these limitations.

3. The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, mining shares, founders’ shares or other rights, not being debt-claims, participating in profits, as well as income from other Corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. The term “dividends” shall be deemed to include also profits derived under an account or arrangement for participation in profits (“conta ou associação em participação).

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident through a permanent establishment situated therein, with which the holding in respect of which the dividends are paid is effectively connected. In such a case the provisions of Article 7 shall apply.

5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment situated in that other State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

6. There shall also be regarded as dividends any profits remitted, paid or credited by a permanent establishment situated in a Contracting State to an enterprise of the other Contracting State to which it belongs, in such a case the provisions of sub-paragraph “a” of paragraph 2 being applicable.

7. The provisions of paragraphs 2 and 6 shall not affect the taxation of a company or a permanent establishment in respect of the profits out of which the income referred to therein is paid.

Article 11
Interest

1. Interest arising in 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 in which it arises and according to the laws of that State, but, if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 15 per cent of the gross amount of the interest.

The competent authorities of the Contracting States shall settle, by mutual agreement, the mode of application of this limitation.

3. Notwithstanding the provisions of paragraphs 1 and 2, interest arising in a Contracting State and paid to the Government of the other Contracting State, a political subdivision or a local authority thereof, or any agency (including a financial institution) wholly owned by that Government or political or administrative or local authority shall be exempt from tax in the first-mentioned State.

4. The tax rate limitation provided for in paragraph 2 shall not apply to interest arising in a Contracting State and attributed or paid to a permanent establishment of a resident of the other Contracting State which is situated in a third State.

5. The term “interest” as used in this Article means income from government securities and bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, and debt-claims of every kind, as well as all other income assimilated to income from money lent by the tax law of the Contracting State in which the income arises.

6. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises through a permanent establishment situated therein and the debt-claim in respect of which the interest is paid is effectively connected with such a permanent establishment. In such a case the provisions of Article 7 shall apply

7. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such a permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment is situated.

8. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such a case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

Article 12
Royalties

1. Royalties arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxed in that other State.

2. However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but, if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 15 per cent of the gross amount of the royalties.

3. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films and films or tapes for television or radio broadcasting), any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise through a permanent establishment situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such a permanent establishment. In such a case the provisions of Article 7 shall apply.

5. Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment in connection with which the obligation to pay the royalties was incurred, and such royalties are borne by such a permanent establishment, then such royalties shall be deemed to arise in the State in which the permanent establishment is situated.

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such a case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

Article 13
Capital gains

1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.

2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise), may be taxed in that other State.

3. Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

4. Gains from the alienation of any property other than that referred to in paragraphs 1, 2 and 3 may be taxed in both Contracting States

Article 14
Independent personal services

1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State, unless the remuneration for such services or activities is paid by a resident of the other Contracting State or is borne by a permanent establishment situated therein. In such a case, the income may be taxed in that other State.

2. The term “professional services” includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

Article 15
Dependent personal services

1. Subject to the provisions of Articles 16, 18, and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned, and

b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

c) the remuneration is not borne by a permanent establishment which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

Article 16
Diretors’ fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the directorate, board of directors, supervisory board or any other similar organ of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17
Artistes and sportsmen

l. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsman, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.

2. Notwithstanding the provisions of Articles 7, 14 and 15, income in respect of personal activities exercised by an entertainer or a sportsman in his capacity as such accrues not to the entertainer or sportsman himself but to another person, that income may be taxed in the Contracting State in which the activities of the entertainer or sportsman are exercised.

3. The provisions of paragraphs 1 and 2 shall not apply where the activities performed in a Contracting State are mainly supported by public funds of the other Contracting State or a political or administrative subdivision or local authority thereof or by entities, the majority of the capital of which is held by one of the said persons. In such a case, the income derived from such activities shall be taxable only in the that other State.

Article 18
Pensions

1. Subject to the provisions of paragraph 2 of Article 19, pensions and similar remuneration in consideration of past employment paid to a resident of the other Contracting State shall be taxable in the first-mentioned State.

2. Notwithstanding the provisions of paragraph 1 of this Article, pensions and similar remuneration paid under the social security system of a Contracting State or a political or administrative subdivision or a local authority thereof shall be taxable only in that State.

Article 19
Governement service

1. Remuneration paid either directly by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority in the discharge of governmental functions may be taxable in that State.

2. Notwithstanding the provisions of paragraph 1, remuneration, including pensions, paid by, either directly or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual who is a national of that State in respect of services rendered to that State or subdivision or authority in the discharge of governmental functions may be taxable in that State.

3. The provisions of Articles 15 and 18 shall apply to salaries, wages and other similar remuneration and to pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.

Article 20
Teachers

1. An individual who is or was a resident of a Contracting State before visiting the other Contracting State and who, at the invitation of the Government of the first-mentioned State or of a non-profit making entity, a university or other educational or scientific research institution belonging to that State or entity, is present in that other State for a period not exceeding two years solely for the purpose of teaching or carrying out scientific research at such institution shall be exempt from tax in both Contracting States on his remuneration for such teaching or research.

Article 21
Students

1. An individual who is or was a resident of a Contracting State and who is temporarily present in the other Contracting State solely for he purpose of pursuing his education or training:

a) as a student at a university, college or school; or

b) as a trainee; or

c) as the recipient of a grant, allowance, award or scholarship granted by a religious, charitable, scientific or educational organization; shall not be taxed in that other State in respect of the payments received for the purpose of his maintenance, education or training, provided that such payments arise from sources outside that State.

2. Students attending a university or other higher educational or technical establishment in a Contracting State who exercise an employment in the other Contracting State for a period not exceeding one year shall not be taxed in that other Contracting State on the remuneration from their employment provided that such a employment is in order to obtain practical experience directly related to their studies and the remuneration does not exceed USD 10,000 a year.

Article 22
Income not expressly mentioned

1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.

2. The provisions of paragraph 1 shall not apply to income other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, and the right or property in respect of which the income is paid is effectively connected with such a permanent establishment. In such a case the provisions of Article 7 shall apply.

3. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, items of income of a resident of a Contracting State arising in the other Contracting State and not dealt with in the foregoing Articles of this Convention may also be taxed in that other State.

CHAPTER IV
Provisions for the elimination of double taxation

Article 23
Methods

1. Where a resident of a contracting State derives income which, in accordance with the provisions of this Convention, may be taxed in the other Contracting State, the first-mentioned State shall allow as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in that other State.

Such deduction shall not, however, exceed that part of the income tax, as computed before the deduction is given, which is appropriate to the income which may be taxed in that other State.

2. In the case of Portugal, where a company which is a resident of Portugal derives dividends from a company which is a resident of Brazil subjected to the federal income tax and not covered by any exemption in which the first-mentioned company holds directly a participation of no less than 25 percent, Portugal shall allow a deduction of 95 percent of the dividends included in its taxable base, provided that the said participation has been held during the preceding two years, or from the date of formation of the Brazilian company if it had occurred later, but, in any case, only if the participation has been held without interruption during such a period.

3. In the case of Brazil, where a company which is a resident of Brazil derives dividends from a company which is a resident of Portugal subjected to Portuguese tax as defined in sub-paragraph “b” of paragraph 1 of Article 2 of this Convention and not covered by any exemption, the deduction provided for in paragraph 1 above shall take into account the tax levied on the company in respect of the income out of which the dividends were paid (indirect credit), due regard being had to the provisions of Brazilian law.

4. Where, in accordance with any provisions of this Convention, income derived by a resident of a Contracting State is exempt from tax in that State, such State may, nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income.

CHAPTER V
Special provisions

Article 24
Non-discrimination

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected.

2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, relief and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

3. Except where the provisions of Article 9, of paragraph 8 of Article 11, or of paragraph 6 of Article 12 apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State.

4. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which similar enterprises of the first-mentioned State are or may be subjected.

5. The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.

Article 25
Mutual agreement procedure

1. Where a resident of a Contracting State considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident.

The case must be presented within two years from the notification of the tax giving rise to the claim or, in the case of taxation in both States, from the second tax imposed or, in the case of tax withheld at source, from the date of payment of the income which was taxes, even if this is the second tax.

2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with the Convention.

Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.

3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention.

4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

Article 26
Exchange of information

1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by this Convention insofar as the taxation thereunder is in accordance with this Convention, in particular, for the prevention or fraud or evasion of such taxes. The exchange of information is not restricted by the provisions of Article 1. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of the taxes covered by the Convention or in the prosecution of offenses or the determination of appeals in relation to, the taxes covered by this Convention. Such persons or authorities shall use the information so obtained only for such purposes. The competent authorities shall, through consultation, develop appropriate conditions, methods and techniques concerning the matters in respect of which such exchanges of information shall be made, including, where appropriate, exchanges of information regarding tax avoidance.

2. The competent authority of a Contracting State may send to the competent authority of the other Contracting State the information which it has, irrespective of a previous request, where:

a) it has reasons to believe that there has been an under-payment of tax as the result of an artificial transfer of profits within a group of enterprises;

b) out of the information previously received from the other Contracting State new data or records appeared which are useful for the taxation in that other Contracting State;

c) any other circumstances leading to the assumption of the existence of a loss of revenue for the other Contracting State.

3. The competent authority of a Contracting state shall supply yearly to the competent authority of the other Contracting State, with an advance identification of the taxpayers, or may supply even without an advance identification, the following informations normally furnished by taxpayers:

a) particulars in respect of profits derived in its territory by legal persons or permanent establishments situated therein, to be sent to the competent authority of the other Contracting State in which the associated legal person or the parent company or head office is domiciled;

b) particulars in respect of profits declared by legal persons which are domiciled in the firs-mentioned Contracting State concerning transactions carried on in the other Contracting State by associated legal persons or permanent establishment.

c) any other type of information which they agree to exchange.

4. The competent authority of the request Contracting State may authorise the representatives of the applicant Contracting State to have access in the first-mentioned State for the purposes of being present, as observers, at the cross-examination of persons and the scrutiny of books and records carried out by the required State.

5. The Contracting States may consult together for the purposes of determining the cases and procedures for a simultaneous tax audit.

For the purposes of this Convention, the term “simultaneous tax audit” means an agreement between the Contracting States to inspect simultaneously, each in its territory, the tax situation of a person or persons having common or related interests, with a view to exchange any relevant information which they obtain.

6. In no case shall the provisions of the preceding paragraphs be construed so as to impose on a Contracting State the obligation:

a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State;

b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy.

Article 27
Members of diplomatic missions and consular posts

Nothing in this Convention shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special agreements.

CHAPTER VI
Final provisions

Article 28
Entry into force

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 at Brasilia as soon as possible.

2. The Convention shall enter into force one month after the exchange of instruments of ratification and its provisions shall have effect for the first time:

a) in Brazil:

i) in respect of taxes withheld at source, on amounts paid, remitted or credited on or after 1 January 2000;

ii) in respect of other taxes dealt with in this Convention, as to income arising in the fiscal year beginning on or after 1 January 2000;

b) in Portugal:

i) in respect of taxes withheld at source, the fact giving rise to them appearing on or after 1 January 2000;

ii) in respect of other taxes, as to income arising in the fiscal year beginning on or after 1 January 2000.

Article 29
Termination

This Convention shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate this Convention, through diplomatic channels, by giving notice of termination at least six months before 31 December in the year specified in the said notice. In such a case the Convention shall cease to have effect:

a) in Brazil :

i) in respect of taxes withheld at source, to amounts paid, remitted or credited on or after 1 January in the calendar year next following that specified in the said notice;

ii) in respect of other taxes, as to income arising in the fiscal year beginning on or after 1 January of the calendar year next following that specified in the said notice;

b) in Portugal:

i) in respect of taxes withheld at source, the fact giving rise to them appearing on or after 1 January in the calendar year next following that specified in the said notice;

ii) in respect of other taxes, as to income arising in the fiscal year beginning on or after 1 January in the calendar year next following that specified in the said notice.

 

In witness whereof the undersigned, duly authorized thereto, have signed this Convention.

Done, at Brasilia, on this day of 16 May 2000, in duplicate, in the Portuguese language, both texts being equally authentic.

For the Government of For the Government of

the Federative Republic of Brazil

 

PROTOCOL

 

At the moment of the signature of this Convention between the Federative Republic of Brazil and the Portuguese Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, the undersigned, duly authorized thereto, have agreed upon the following additional provisions which constitute an integral part of the Convention.

1. With reference to Article 2, paragraph 1, sub-paragraph “a”

It is understood that the social contribution on net profit (“CSLL – Contribuição Social sobre o Lucro Líquido”) created by Law 7,689 of 15 December 1988 is included in the taxes referred to in Article 2, paragraph 1, sub-paragraph “a”.

2. With reference to Article 2, paragraph 3, sub-paragraph “b”

It is understood that “derrama” means the local surchage on the Corporate income tax.

3. With reference to Article 7, paragraph 3

It is understood that the provisions of paragraph 3 of Article 7 shall apply only in respect of executive and general administrative expenses incurred in the State in which the permanent establishment is situated or elsewhere.

4. With reference to Article 11, paragraphs 3 and 5

It is understood that the provisions of paragraph 3, of Article 11 shall only apply in respect of interest received by any agency (including a financial institution) wholly owned by the Government of a Contracting State or a political or administrative subdivision or local authority thereof where the said agency is the beneficial owner of the interest.

It is also understood that interest paid as “remuneration on the company’s equity” (“remuneração sobre o capital próprio”) in accordance with Brazilian tax law is also considered interest for the purposes of paragraph 5 of Article 11.

5. With reference to Article 12, paragraph 3

It is understood that the provisions of paragraph 3 of Article 12 shall apply to payments of any kind received as a consideration for the rendering of technical assistance and technical services.

6. With reference to Article 13, paragraph 4 and 14, paragraph 1

It is understood that in the event that Brazil, after the signature of this Convention, concludes with a third State not situated in Latin America a convention which limits – with respect to income referred to in the said paragraphs – the taxation power of the Contracting State that is not the State of which the recipient of the income is a resident, an equal limitation will be automatically applicable as regards the relations between Brazil and Portugal.

7. With reference to Article 23, paragraph 2

It is understood that, if Portugal changes the method for the avoidance of economic double taxation of dividends from foreign sources currently provided for in its domestic law to the method of indirect credit, the new method shall automatically apply in respect of dividends paid by a company which is a resident of Brazil to a copany which is a resident of Portugal.

8. With reference to Article 24

a) It is understood that the provisions of paragraph 6 of Article 10 are not in conflict with the provisions of paragraph 2 of Article 24.

b) It is understood that the provisions of the laws of the Contracting States that do not allow that “royalties” as defined in paragraph 3 of Article 12, paid by a permanent establishment situated in a Contracting State to a resident of the other Contracting State that carries on business in the first-mentioned State through such a permanent establishment, be deductible at the moment of the determination of the taxable income of the above referred permanent establishment, are not in conflict with the provisions of Article 24 of this Convention.

c) It is understood that the provisions of paragraph 4 of Article 24 shall not apply to accessory requirements.

d) It is understood that, with respect to Article 24, the provisions of the Convention shall be deemed not to preclude the application by a Contracting State of its domestic rules dealing with “thin capitalization” or excessive indebtedness.

e) As regards Brazil, it is understood that paragraph 5 of Article 24 shall apply only in respect of taxes which are levied by the Union.

9. With reference to the Free Zones in Madeira island, Santa Maria island, Manaus, SUDAM and SUDENE

It is understood that the benefits of this Convention will not be attributed to any person entitled to fiscal benefits in respect of income tax in accordance with the provisions of the laws and othe measures concerning the Free Zones in the Madeira Island, the Santa Maria Island, Manaus, SUDAM and SUDENE or benefits similar to those which are granted or are available or made available under any laws or other measures adopted by either Contracting State. The competent authorities of the Contracting States shall notify each other of any laws or similar measures and shall consult together on the similarity or non-similarity of such benefits.

 

In witness whereof the undersigned, duly authorized thereto, have signed this Protocol.

Done at Brasília this 16th day of May 2000, in duplicate, in the Portuguese language, both texts being equally authentic.

For the Government of For the Government of the Federative Republic of Brazil

At the moment of the signature of the Convention between the Federative Republic of Brazil and the Portuguese Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, the undersigned, duly authorized thereto, have agreed upon the following provisions which constitute an integral part of the Convention.

1. With reference to Article 11, paragraphs 3 and 4

It is understood that the provisions of paragraph 3, “a”, of Article 11 shall only apply to interest paid to an agency (including a financial institution) wholly owned by the Government of a Contracting State or by a political subdivision thereof when such interest is received by the agency in connection with its functions of public nature.

It is understood that interest paid as “remuneration on the company’s equity” (“remuneração sobre o capital próprio”) in accordance with Brazilian tax law is also considered interest for the purposes of paragraph 4 of Article 11.

It is also understood that the term “interest”, as defined for the purposes of paragraph 4 of Article 11, includes commissions and similar fees paid by a resident of a Contracting State for services rendered by a bank or other financial institution.

2. With reference to Article 12, paragraph 3

It is understood that the expression “for information concerning industrial, commercial or scientific experience” mentioned in paragraph 3 of Article 12 includes income derived from the rendering of technical assistance and technical services.

3. With reference to Article 14

It is understood that the provisions of Article 14 shall apply even if the activities are exercised by a company or a partnership.

4. With reference to Article 24

It is understood that the provisions of paragraph 5 of Article 10 are not in conflict with the provisions of paragraph 2 of Article 24.

It is understood that the provisions of Brazilian tax law that do not allow that royalties as defined in paragraph 3 of Article 12, paid by a permanent establishment situated in Brazil to a resident of Portugal that carries on business in Brazil through such a permanent establishment, be deductible at the moment of the determination of the taxable income of the above referred permanent establishment, are not in conflict with the provisions of paragraph 3 of Article 24.

It is also understood that, with respect to Article 24, the provisions of the present Convention do not prevent a Contracting State from applying the provisions of its tax law regarding “thin capitalization”.

In witness whereof the undersigned, duly authorized thereto, have signed this Protocol.

Done at …………….. this …………. day of………….. 20………., in duplicate, in the Portuguese and in the………………………. languages, both texts being equally authentic.

 

For the Government of the Portuguese Republic

For the Government of the Federative Republic of Brazil


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