Cross-border Tax Talks

Brazil Tax Update: Full inclusion to full immersion

Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Dr. Romero Tavares, PwC Brazil’s International Tax Leader and a professor of international tax law in São Paulo. Doug and Romero discuss the increasing intersection between Brazil’s international tax policy and global trade dynamics, including the effects of recent US executive orders. They cover Brazil’s high-tax corporate environment, its historically aggressive CFC-like full inclusion regime, and the country’s rapid adoption of a qualified domestic minimum top-up tax (QDMTT). The conversation explores the political and policy rationale behind these moves, the anticipated redesign of Brazil’s CFC regime, and the operational challenges multinationals face with the new OECD-aligned transfer pricing rules. Romero also breaks down Brazil’s massive indirect tax reform and the country’s potential shift to more internationally-aligned tax norms, while questioning the long-term viability of the undertaxed profits rule (UTPR) and Pillar Two’s durability under changing geopolitical winds. 

Timestamps:

• 00:00 – Introduction to Romero Tavares and current political, tax, and trade climate in Brazil 
• 04:15 – International confluence of tax and trade policy; looking at the big picture 
• 05:40 – Brazil’s complex corporate tax regime and high tax environment 
• 06:43 – Brazil’s reforming indirect tax system and the future VAT model 
• 09:15 – Overview of Brazil’s full inclusion rules and their interaction with Pillar Two 
• 13:30 – Implementation of OECD-aligned transfer pricing rules in Brazil 
• 17:20 – Practical challenges of applying the new TP rules within Brazil’s economic model 
• 18:30 – Introduction of Brazil’s QDMTT: policy, process, and political trade-offs 
• 24:20 – Why Pillar Two could apply in Brazil despite its high headline tax rates 
• 29:15 – The roadmap for reforming Brazil’s full inclusion/CFC regime 
• 31:20 – How Brazil approached its QDMTT legislation and choice of accounting standards 
• 33:00 – Brazil’s indirect tax reform: scope, timeline, and implementation challenges 
• 40:50 – Potential changes to Brazil’s corporate tax, including dividend withholding 
• 42:15 – Romero’s academic view on the future of Pillar Two and global tax coordination 
• 47:20 – Legal and political headwinds facing the UTPR and multilateralism 

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