Recently, Brazilian Tax Authorities issued the Tax Ruling n. 6.017/2019 (“Solução de Consulta DISIT”) restating that technical services and assistance remittances to a beneficiary located in Finland do not trigger Withholding Income Tax (“WHT”).
The abovementioned Tax Ruling has binding effect, therefore it must be observed and applied by the Brazilian Federal Revenue in all cases involving these kinds of remittances.
Thus, Tax Authorities assured the applicability of the guidelines listed in the Double Tax Treaty (“DTT”) signed between Brazil and Finland.
Historically, the Ministry of Finance has established that technical services and assistance remittances were classified as royalties triggering WHT at the rate of 15% in Brazil (source).
Due to recent courts positions, the Brazilian Tax Authorities changed its perspective to consider that WHT should be levied just when the DTT includes technical services and assistance in its royalty treatment definition.
It is paramount to emphasize that the Brazil-Finland DTT does not classify technical services and assistance as royalties, preventing the WHT assessment in those transactions.
From this perspective, taxpayers that remit payments of technical services and assistance abroad have WHT exemption, being possible to enhance its activities involving those operations.
PNST tax team is at your disposal to clarify any question and for additional information.