Newsletter

The new Convention signed between Brazil and Norway is particularly relevant for companies engaged in international contracts, especially those involved in offshore, oil, and gas activities.

On March 14, 2025, Decree No. 12,406/2025 (available here in Portuguese) was published, enacting the Brazil–Norway Convention for the Elimination of Double Taxation concerning Taxes on Income and the Prevention of Tax Evasion and Avoidance. This Convention replaces the previous 1980 treaty and modernizes the framework for international taxation between the two countries.

The treaty aims to prevent the same income from being taxed in both jurisdictions—a common issue in cross-border operations—while also tackling abusive tax planning practices, such as using artificial structures.

Who will be impacted?

• Brazilian companies with contracts in Norway, particularly in the energy sector, maritime transport, and the provision of technical services.
• Norwegian companies operating or investing in Brazil.
• Offshore structures with economic activities related to the exploration of natural resources in the jurisdictional waters of either country.

Taxes covered by the treaty

Brazil:

• Corporate Income Tax (Imposto de Renda - IRPJ).
• Social Contribution on Net Profit (Contribuição Social sobre o Lucro Líquido - CSLL).

Norway:

• National, county, and municipal income taxes.
• National tax on income from the exploration and exploitation of subsea petroleum resources, and related activities, including pipeline transportation of the extracted oil.
• National tax on the remuneration of non-resident artists.

Key provisions for contracts and offshore structures

Permanent Establishment

• A company providing technical or operational services for more than 183 days within any 12-month period in the other contracting state may be deemed to have a permanent establishment, which may trigger local taxation.

Offshore Activities

• Exploration of the seabed or subsoil, including supply transport and operation of auxiliary vessels, will constitute a permanent establishment—unless the activity is carried out for less than 30 days within 12 months.
• Salaries, capital gains, and business profits related to offshore activities may be taxed in the country where the operations are performed.

Entitlement to Benefits

• The treaty restricts access to its benefits to entities that have economic substance and are not established primarily to obtain treaty benefits.
• This is especially relevant for holding structures and offshore entities operating between Brazil and Norway.

Contractual and Structural Implications

• International contracts: Tax allocation clauses between the parties may need to be revisited. The treaty sets clear limits on where and how income may be taxed, which may contradict current contractual terms.
• Dividend and royalty distributions: The treaty introduces new withholding tax caps, potentially impacting the financial balance between the parties—particularly when contracts are based on gross or net amounts.
• Mandatory provisions and dispute resolution: Article 27 establishes a mutual agreement procedure between the two states. Contracts involving cross-border income may consider referencing this mechanism to reinforce legal certainty.

The provisions of the Convention, which came into force in Brazil on the date of publication of the Federal Decree, will directly affect operations in the energy, shipping, consulting, and technical services sectors, influencing tax jurisdiction allocation, contract structuring, and the tax treatment of cross-border income between Brazil and Norway.

The alert was prepared by Daniela Davila and Fernanda Aquino, partner and associate from the Energy & Natural Resources: Oil and Gas area, alongside Tiago Severini and Carlos Augusto Bender, partner and associate from the Tax & Customs practice. They are available to clarify any questions and assess potential scenarios.