Decree No. 12,667\/2025 promulgates the Protocol amending the Convention between Brazil and India, aimed at eliminating double taxation and preventing tax evasion in matters relating to income tax \u2014 expressly including the Social Contribution on Net Profit (CSLL).<\/p>\n
Decree No. 12,666\/2025, in turn, enacts the Cooperation and Investment Facilitation Agreement (ACFI), signed on 25 January 2020, which establishes a modern framework for cooperation, promotion, and risk mitigation in reciprocal investments.<\/p>\n
Together, these two instruments form a strategic package designed to strengthen the business environment between the two emerging economies and enhance legal certainty in bilateral operations, on the eve of Brazil\u2019s official mission to New Delhi, from 15 to 17 October.<\/p>\n
The Protocol enacted by Decree No. 12,667\/2025<\/strong> updates fundamental definitions in the original Convention, such as tax residence<\/em> and taxes covered<\/em>, aligning them with the most recent international standards.<\/p>\n New maximum withholding tax rates have been established for dividends, interest, royalties, and technical services, with differentiated rates depending on the nature of the payment and the status of the beneficial owner, as detailed below:<\/p>\n 15% \u2014 in other cases<\/td>\n<\/tr>\n 15% \u2014 in all other cases<\/td>\n<\/tr>\n 10% \u2014 for other royalties<\/td>\n<\/tr>\n <\/p>\n The Protocol also introduces anti-abuse rules aligned with international standards, designed to curb treaty shopping<\/em> and ensure that the benefits of the Convention apply only to transactions with genuine economic substance and legitimate business purposes.<\/p>\n These new rules combine objective eligibility criteria under the Limitation on Benefits (LOB)<\/em> clause, an Active Conduct of Business Test<\/em>, and a Principal Purpose Test (PPT)<\/em>.<\/p>\n Together, these mechanisms ensure that reduced rates and other Convention benefits apply solely to taxpayers with effective residence, substantial business activity, and legitimate commercial purpose, preventing their use in structures primarily intended to obtain treaty benefits inconsistent with the Convention\u2019s object and purpose.<\/p>\n The Protocol updates the Mutual Agreement Procedure (MAP)<\/em> clause, reinforcing taxpayers\u2019 rights to present cases of taxation not in accordance with the Convention to the competent authorities of their State of residence. The submission period has been shortened from five to three years, counted from the first notification of the disputed taxation, making the mechanism more agile and adequate.<\/p>\n The Protocol will enter into force 30 days after the exchange of the last diplomatic note between Brazil and India confirming completion of their respective internal approval procedures.<\/p>\n Its effects, however, will apply to the following fiscal year: in Brazil, it will apply to income paid or credited from 1 January of the year following entry into force; in India, it will apply to fiscal years beginning on or after 1 April of the same year, corresponding to the start of India\u2019s fiscal year.<\/p>\n The Agreement establishes permanent governance bodies \u2014 the Joint Committee<\/em> and National Focal Points (Ombudsmen)<\/em> \u2014 responsible for monitoring the implementation of the Agreement, proposing improvements, and addressing potential disputes preventively.<\/p>\n These mechanisms aim to promote continuous dialogue between authorities and investors, strengthen regulatory transparency, and ensure the cooperative development of bilateral investment relations.<\/p>\n The Agreement reinforces mechanisms for the exchange of information between the Parties on investment opportunities, regulatory frameworks, public policies, and applicable regimes. Its goal is to increase transparency, facilitate dialogue between authorities and investors, and promote bilateral cooperation in investment matters. This exchange of information takes place within the Agreement\u2019s governance mechanisms.<\/p>\n The ACFI guarantees the free transfer of investment-related funds \u2014 such as profits, dividends, interest, royalties, and other income \u2014 on a non-discriminatory basis.<\/p>\n This provision enhances predictability for Indian companies operating in Brazil and for Brazilian groups with operations in India, reducing financial and exchange barriers.<\/p>\n The guarantees are consistent with international best practices and Brazil\u2019s multilateral commitments concerning foreign direct investment.<\/p>\n The Agreement introduces regulatory cooperation instruments between governments and preventive dispute-resolution mechanisms, seeking to reduce litigation and encourage dialogue between authorities and investors.<\/p>\n It also provides for joint governance mechanisms through an Investment Committee<\/em> responsible for monitoring implementation and proposing continuous improvements.<\/p>\n The Brazilian ACFI model prioritises risk mitigation and institutional transparency over traditional investor\u2013State arbitration mechanisms.<\/p>\n The Agreement will enter into force on the 21st day following receipt of the last diplomatic note confirming that both Brazil and India have completed the internal procedures required for its incorporation, including, in Brazil\u2019s case, legislative approval and presidential promulgation.<\/p>\n From that date, the Agreement will take full effect and remain in force indefinitely, unless terminated by either Party through prior written notification at least one year in advance.<\/p>\n <\/p>\n","protected":false},"template":"","categories":[52],"class_list":["post-4454","vr_insights","type-vr_insights","status-publish","hentry","category-alerts"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.vieirarezende.com.br\/en\/wp-json\/wp\/v2\/vr_insights\/4454","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vieirarezende.com.br\/en\/wp-json\/wp\/v2\/vr_insights"}],"about":[{"href":"https:\/\/www.vieirarezende.com.br\/en\/wp-json\/wp\/v2\/types\/vr_insights"}],"wp:attachment":[{"href":"https:\/\/www.vieirarezende.com.br\/en\/wp-json\/wp\/v2\/media?parent=4454"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vieirarezende.com.br\/en\/wp-json\/wp\/v2\/categories?post=4454"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}b) New limits on withholding tax rates<\/strong><\/h4>\n
\n\n
\n Income Type<\/strong><\/td>\n Before
\nDecree No. 51\/2010<\/strong><\/td>\nNow
\nDecree No. 12,667\/2025<\/strong><\/td>\n<\/tr>\n<\/thead>\n\n\n Dividends<\/strong><\/td>\n 15% (single rate on gross dividends)<\/td>\n 10% \u2014 when the beneficial owner is a company (not a partnership) holding \u2265 20% of the payer\u2019s capital for at least 365 days;<\/p>\n \n Interest<\/strong><\/td>\n 15% (single rate)<\/td>\n 10% \u2014 when the beneficial owner is a bank and the loan has a minimum term of five years, aimed at investment projects or equipment purchases;<\/p>\n \n Royalties<\/strong><\/td>\n 25% \u2014 for trademarks;
\n15% \u2014 for other royalties (patents, know-how, copyrights, etc.)<\/td>\n15% \u2014 for trademarks;<\/p>\n \n Technical services<\/strong><\/td>\n (not provided for)<\/td>\n 10% \u2014 on gross remuneration for managerial, technical, or consultancy services, when the beneficial owner is a resident of the other Contracting State and has no permanent establishment there<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n c) Anti-abuse provisions<\/strong><\/h4>\n
d) Mutual Agreement Procedure (MAP)<\/strong><\/h4>\n
e) Entry into force<\/strong><\/h4>\n
2. Cooperation and Investment Facilitation Agreement (ACFI)<\/strong><\/h3>\n
a) Joint Committee and National Focal Points (Ombudsmen)<\/strong><\/h4>\n
b) Institutional cooperation and exchange of investment information<\/strong><\/h4>\n
c) Free movement of capital and non-discriminatory treatment<\/strong><\/h4>\n
d) Investment facilitation and institutional cooperation<\/strong><\/h4>\n
e) Entry into force<\/strong><\/h4>\n