Post by account_disabled on Mar 13, 2024 4:06:43 GMT -5
However the wording of could have been clearer regarding the crediting of any withholding tax required by a third jurisdiction on income earned directly by the subsidiary abroad. For example withholding income tax in the by a holding company in the British Virgin Islands which is held by a tax resident individual. This lack of clarity is especially impactful when the subsidiary's jurisdiction of residence does not tax corporate income meaning there would be no opportunity to credit this source withholding already abroad.
However all rivers flow to the sea. Considering therefore that this withholding tax would occur on income that ultimately would make up the profits of the subsidiary abroad it must be concluded CG Leads that it is possible to credit it in Brazil article II without prejudice applicable limits article IV. Otherwise taxpayers can use the transparency election in article a limited check-the-box to make this crediting possible.
Furthermore article of the CFC-PF Rules was unfortunate in that it did not provide express authorization for the loading of excess foreign taxes for crediting purposes in Brazil in subsequent years. If there is authorization for contingent use of losses accumulated abroad under of article a similar charging rule for foreign tax credits is applicable for systemic coherence if nothing else.
These were some considerations about the CFC-PF rules contained in Law No. . Many other considerations can still be made especially as this is new legislation. Be that as it may it is unquestionable that by the year the IRPF has become more complex.
Note that clarification expressed in this sense could have easily been confirmed by Law No. . After all article of Law No. itself determines expungement in case of overlap of CFC-PJ rules with transfer pricing and thin capitalization rules. Therefore a short-worded provision providing application preference according to the case was sufficient which is expected to be provided for at an infra-legal level.
Without prejudice to the above some considerations regarding the crediting of foreign tax under article of the CFC-PF rules are still relevant. This device would also deserve an exhaustive study of its own but in short it provides for the crediting in Brazil of the tax eventually charged by the controlled company's jurisdiction of residence on the latter's profits corporate income tax . Correlatedly any withholding tax required by the controlled company's jurisdiction of residence when paying dividends is not creditable in Brazil an effect that is consistent with the exemption of qualified dividends under article previously taxed income.
However all rivers flow to the sea. Considering therefore that this withholding tax would occur on income that ultimately would make up the profits of the subsidiary abroad it must be concluded CG Leads that it is possible to credit it in Brazil article II without prejudice applicable limits article IV. Otherwise taxpayers can use the transparency election in article a limited check-the-box to make this crediting possible.
Furthermore article of the CFC-PF Rules was unfortunate in that it did not provide express authorization for the loading of excess foreign taxes for crediting purposes in Brazil in subsequent years. If there is authorization for contingent use of losses accumulated abroad under of article a similar charging rule for foreign tax credits is applicable for systemic coherence if nothing else.
These were some considerations about the CFC-PF rules contained in Law No. . Many other considerations can still be made especially as this is new legislation. Be that as it may it is unquestionable that by the year the IRPF has become more complex.
Note that clarification expressed in this sense could have easily been confirmed by Law No. . After all article of Law No. itself determines expungement in case of overlap of CFC-PJ rules with transfer pricing and thin capitalization rules. Therefore a short-worded provision providing application preference according to the case was sufficient which is expected to be provided for at an infra-legal level.
Without prejudice to the above some considerations regarding the crediting of foreign tax under article of the CFC-PF rules are still relevant. This device would also deserve an exhaustive study of its own but in short it provides for the crediting in Brazil of the tax eventually charged by the controlled company's jurisdiction of residence on the latter's profits corporate income tax . Correlatedly any withholding tax required by the controlled company's jurisdiction of residence when paying dividends is not creditable in Brazil an effect that is consistent with the exemption of qualified dividends under article previously taxed income.