OECD Requests Input on Brazil’s Mutual Agreement Procedures

Written by | Tax and Customs

Quick Read:

  • As part of its Base Erosion and Profit Shifting (“BEPS”) project, the OECD has requested that taxpayers provide input on Brazil’s mutual agreement procedures (“MAPs”).
  • Brazil has a very time-consuming dispute resolution system and Brazil’s MAP requires that the taxpayer first go through its dispute resolution system before filing for resolution under its MAP.
  • Brazil’s MAP badly fails to fulfil the OECD’s goal to have MAPs that resolve disputes in a “timely, effective and efficient” manner.
  • Taxpayers have until 13 December 2018 to file their reviews with the OECD.


Brazil has a highly litigious tax environment. Traditionally the approach taken by Brazil’s tax authorities and taxpayers is one of mutual suspicion.

The OECD’s BEPS project is a comprehensive multi-country effort to address tax avoidance strategies that use loopholes in tax laws to shift profits to the lowest possible jurisdictions. Member countries are required to follow the Action Plan on Base Erosion and Profit Shifting, which contains 15 actions to be followed.

Action 14 requires countries to implement mechanisms to resolve treaty-related disputes in a “timely, effective and efficient manner”. This is part of the goal of “ensuring transparency while promoting increased certainty and predictability” set out in the Action Plan. Moreover, Action 14 requires that the “formalities involved in instituting and operating the MAP should be kept to a minimum and any unnecessary formalities eliminated”.

How is the implementation of the MAPs taking place in Brazil?

Brazil has one of the most convoluted and difficult to predict tax systems in the world. For instance, Brazil’s tax authorities at all levels regularly ignore the interpretation of tax laws provided in court decisions and continue to issue fines to taxpayers for alleged breaches of tax laws – often pressed by governments’ immediate revenue needs without regard to the long-term effects of their actions.

Private tax rulings take years to be issued in Brazil and in all but the most exceptional cases the rulings go against the taxpayers’ interests. Hence, taxpayers invariably go through the formal administrative tax dispute resolution procedure and, when unsuccessful, file court proceedings. Both administrative and judicial procedures are extremely formal and frequently take more than a decade until a binding decision on all parties is issued.

On 10 November 2016 Brazil’s Federal Revenue Department published Normative Instruction 1,669/2016 (“IN 1,669”). IN 1,669 set out Brazil’s MAP for disputes relating to the application of international treaties and conventions of which Brazil is a party. The rules for filing for the MAP were strict and included an obligation on the taxpayer to “indicate that the matter was submitted to judicial or administrative analysis, in Brazil or in another Contracting State” and, “if applicable”, the request and answer made to the foreign authority needed to be filed by the taxpayer.

Yet apparently that was not strict enough for Brazil’s Federal Revenue Department. On 29 November 2018 Normative Instruction 1,669/2016 was repealed and replaced by Normative Instruction 1,846/2018 (“IN 1,846/2018”). Among other things, IN 1,848/2018 now requires that taxpayers “prove that the matter has been submitted to judicial or administrative analysis, in Brazil or in the other Contracting State, by filing a copy of the request and corresponding reply, if applicable, and [copies] of other documents relating to the progress of the proceedings”.

Brazil’s mutual agreement procedures were ineffective and this was just made worse.

If Brazil’s first attempt to implement the MAP was already problematic, the new MAP goes completely against the principles set out in Action 14. In practice, it may be that taxpayers will have to resort to filing for rulings and formal consultations in countries where the analyses are quick merely to fulfil the MAP filing requirements set out in IN 1,846/2018.

Unfortunately, it appears that Brazil’s tax authorities will need to radically change their approach if they are to comply with Brazil’s OECD-related commitments and ultimately eradicate the suspicions so strongly held by Brazil’s taxpayers.

For those taxpayers wishing to file their submission, the deadline is 13 December 2018.

For more information contact me.

Last modified: December 11, 2018