Tax Havens and Privileged Tax Regimes’ List Changed

Written by | Tax and Customs

On 26 December 2017 the Brazilian Federal Revenue Department (“RFB”) issued a new regulation (Normative Instruction 1,773/2017). This new regulation amends the key piece of regulation that governs tax havens and privileged tax jurisdictions (Normative Instruction 1,037/2010).

Brazilian law differentiates between those countries that are regarded as tax havens (that is, jurisdictions that “do not tax income or that tax income at a rate lower than 20%” or whose laws “do not allow access to information relating to the shareholding of legal entities or their ownership”) and privileged tax regimes (that is, tax regimes or types of legal entities within a jurisdiction that provide the aforementioned advantages).

The amending regulation removed Singapore, Costa Rica and Madeira Island from the tax haven list. However, the following entities were added to the privileged tax regime list:

Costa Rica’s Free-Trade Zone Regime;
Madeira Island’s International Business Centre regime; and
Singapore’s special rate of tax for non-resident shipowner or charterer or air transport undertaking; exemption and concessionary rate of tax for insurance and reinsurance business; concessionary rate of tax for Finance and Treasury Centre; concessionary rate of tax for trustee company; concessionary rate of tax for income derived from debt securities; concessionary rate of tax for global trading company and qualifying company; concessionary rate of tax for financial sector incentive company; concessionary rate of tax for provision of processing services for financial institutions; concessionary rate of tax for shipping investment manager; concessionary rate of tax for trust income to which beneficiary is entitled; concessionary rate of tax for leasing of aircraft and aircraft engines; concessionary rate of tax for aircraft investment manager; concessionary rate of tax for container investment enterprise; concessionary rate of tax for container investment managerconcessionary rate of tax for approved insurance brokers; concessionary rate of tax for income derived from managing qualifying registered business trust or company; concessionary rate of tax for ship broking and forward freight agreement trading; concessionary rate of tax for shipping-related support services; concessionary rate of tax for income derived from managing approved venture company); and concessionary rate of tax for international growth company).

The amending regulation is welcome news as it removes the blanket rule that previously applied to all entities in Costa Rica, Madeira Island and Singapore, which – among other advantages – means that the applicable withholding income tax to entities in those jurisdictions (other than those mentioned in the privileged tax regime list) will be 15%, instead of the 25% that applied previously. The higher rate will continue to apply to those entities in the privileged tax regime list.

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Last modified: March 20, 2019