On October 3rd, Provisional Measure 1,262 (“MP 1,262”, equivalent to an executive order) was enacted, introducing OECD’s Pillar 2 rules to the Brazilian tax system. Although it still needs to be approved and converted to Law, (if approved) no major changes are expected as it should not deviate from the OOECD’s GloBE rules model.
The legislation is expected to be applied from January, 2025 onwards and as anticipated by Government officials, the introduction of Pilla 2 rules in Brazil started with the Qualified Domestic Minimum Top-up Tax (QDMTT), only. The effects of the QDMTT will be materialized via an additional rate to the existing Social Contribution on Net Income ("CSLL").
Along with the MP 1,262, Normative Instruction 2,228 was also published, setting forth further specifics of the new rules. Both, the MP and the Normative Instruction introduce several new concepts to Brazilian tax legislation and will demand careful interpretation to be applied and therefore, attention from the taxpayers. Although aligned with the Inclusive Framework, the particularities of our tax system need to be taken into account when mapping out the effective tax impacts of the new rules.
The enactment of the Pillar 2 rules in Brazil is a landmark and along with the introduction of the OECD’s aligned transfer pricing rules back in 2023, confirms Brazil’s alignment to OECD’s standards.
Assessing whether your business in Brazil is within the scope of the new rules is essential, since in case it is, an analysis of the potential impacts to your business and revisiting tax policies (e.g., such as reviewing the utilization or non-utilization of a tax incentive or the timeline for the amortization of a goodwill) is of utmost relevance.
Our tax team is at your disposal to assist you with it.
