Despite the complexities of Brazil’s taxation system, the taxation of international loans to Brazilian entities is straightforward.
In short, unless a specific exemption applies (such as under a double taxation agreement), lenders must pay 15% income tax on the interest payable on the loan (if the lender is based in a tax haven, then the rate is increased to 25%).
The income tax payable by the lenders must be withheld by the borrower at the source at the time of payment, offsetting or other types of compensation.
For those countries that adopt reciprocity principles, the income tax withheld at the Brazilian source can generally be offset against the income tax payable by the lender.
The Federal Revenue Department has confirmed in a binding ruling (Solução de Consulta 212-COSIT/2023) that where the transaction involves the financing of an asset imported by a borrower, only the interest component of the transaction is taxable in Brazil.
Last modified: October 24, 2023