Investor Presentaiton
CORPORATE LAW
BY PAULO SALVADOR RIBEIRO PERROTTI AND FERNANDO MAURO BARRUECO
BRAZIL - CANADA COMPARATIVE LAW
to profits and dividends, which are exempt from withheld income tax.
As of January 1, 1997 new rules were introduced in income tax law to
regulate transfer pricing in business transacted by resident individuals
or corporations with non-resident parties for import and export, and
interest payments abroad.
These rules apply in the following situations: (1) when a corporation
domiciled in Brazil conducts business with non-domiciled related
parties; (II) when a domiciled individual or corporation carries out
business with a related or unrelated party domiciled in a country where
income tax is not charged or is assessed at a rate lower than 20%, or
where the domestic legislation maintains secrecy with regard to equity
participation or corporate ownership.
2.2. Taxes on Industrialized Products
The taxes on industrialized products is levied on output and on the
importation of industrialized goods. Taxes on industrialized products is
noncumulative and thus tax due may be offset by credits arising from
the purchase of raw materials, intermediary products, and packaging
materials. However, no credits are granted for goods that become fixed
assets. The rates at which taxes on industrialized products is charged
on the value of industrialized goods, as they are imported or dispatched
from domestic plants, varies in accordance with the nature of the goods.
The average rate is 10%. Export goods are exempted from taxes on
industrialized products.
2.3. Tax on Financial Transactions
The tax on financial transactions, insurance and securities is due on
bank loans and similar transactions, on foreign currency transactions, on
insurance premiums, and on securities traded. The rate varies depending
on the type of operation.
2.4. Wealth Tax (IGF)
The wealth tax has not yet been instituted.
3. State (and Federal District) Taxes
The States and the Federal District are empowered to levy the
following taxes: inheritance and gift tax (ITD); tax on circulation of
goods, interstate and inter-municipal transport, and communications
(ICMS); tax on ownership of motor vehicles (IPVA).
The Tax on Circulation of Goods and Services (ICMS) is the main State
tax, and is due on operations involving circulation of goods (including
manufacturing, marketing, and imports) and on interstate and inter-
municipal transport and communications services. ICMS is non-
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