In terms of the taxes covered, most of the tax treaties entered into by Brazil deviate from the OECD model following the wording of Article 2 by adopting an exhaustive list of taxes on income to which a tax treaty applies. PRELIMINARY CONCLUSIONS: IS CSLL INCLUDED WITHIN THE MEANING OF THE WORD "TAX" IN TAX.
INTERIM CONCLUSIONS: IS THE CSLL INCLUDED WITHIN THE MEANING OF THE WORD “TAX” IN THE TAX
Consequently, on the remaining basis, it is possible to conclude that the CSLL is considered both by a number of tax researchers24 and by the jurisprudence of the administrative courts of Brazil as a tax that is not covered by the tax treaties concluded by Brazil with Chile, China, Finland , Israel, Korea (Rep.), Mexico, Netherlands, South Africa and Ukraine. However, this scenario has recently changed with the entry into force of Article 11 of the law which states that, for interpretation purposes, tax treaties concluded by Brazil include the CSLL in their essential object. The debates raised by this law are analyzed in section 5., which immediately follows an overview of the case law on this topic in section 4.
BRAZILIAN CASE LAW ON THE INCLUSION OF CSLL IN THE OBJECTIVE SCOPE OF TAX TREATIES.
BRAZILIAN CASE LAW ON THE INCLUSION OF THE CSLL WITHIN THE OBJECTIVE SCOPE OF TAX TREATIES
DECISION OF THE ADMINISTRATIVE COUNCIL OF TAX APPEALS (CONSELHO ADMINISTRATIVO DE RECURSOS
The essential similarity between IRPJ and CSLL requires the application of the provisions of the convention to avoid double taxation. With all due respect, in the opinion of the authors, the arguments presented by the Judge-Rapporteur should be taken with caution, given that the Brazilian Congress approved the text of the Austria-Brazil Treaty on Taxes on Income and Wealth (1975) with the inclusion of Article 2(2) , which expressly refers to taxes of the same or substantively similar nature introduced after the conclusion of the tax treaty. The competent authorities of the two Contracting States shall inform each other of any changes in their tax legislation, in particular in relation to the seventh paragraph of Article 23.
The purpose of Article 2(2) of the Austria-Brazil Income and Capital Tax Treaty (1975) is to establish that the objective scope should cover identical or substantially similar taxes in order to allow renegotiation of the tax treaty following any change in the national legislation of both Contracting States. THE COMMENTARY ON ARTICLE 2 OF THE OECD MODEL AND THE VIENNA TREATY LAW.
THE COMMENTARY ON ARTICLE 2 OF THE OECD MODEL AND VIENNA CONVENTION ON THE LAW OF TREATIES
Contracting State after the date of signature of the Convention in addition to, or in lieu of, the existing taxes in that State".33 (Emphasis added). Moreover, the OECD imposes no consequences on the breach of the obligation to notify.34. In this context, it should be noted that, in several cases, the position advanced by the 2nd Ordinary Panel of the CARF in 201538 works on the.
In accordance with the principle of good faith, notification of changes in national (tax) laws serves a valuable purpose with respect to all aspects of the application of the Convention.”. This is because a contracting state that does not comply with its obligation to notify the other state, by conditioning the application of a tax treaty's article 2, paragraph the exercise of its taxation rights and exemptions for certain types of income to new taxes created after the conclusion of the tax treaty, a fact that would benefit its own tax revenues.
FURTHER CONSIDERATIONS
CSLL should be recognized that the express reference to the CSLL at the time of the amendment of the tax treaty provided taxpayers with greater legal certainty. After all, in the absence of an explicit reference, it would be conceivable that both contracting states deliberately omitted the CSLL when negotiating the amendment of the tax treaty, which was signed after the introduction of the CSLL. Finally, it should be noted that Article 2 of the OECD model is intended to ensure the permanent protection afforded by international tax treaties to taxpayers, so that changes in the composition of the taxes existing in the tax system of one of the contracting states are without prejudice to the degree of protection afforded by the treaty provisions.
Consequently, if the intention is to provide protection to taxpayers, it would not make sense to condition the effect of Article 2 of the OECD Model on notifications from Contracting States.
INTERIM CONCLUSIONS
The national law provision introduced by law is currently generating great debate as to whether it constitutes a treaty violation, since it is later national law that in certain cases supersedes and extends the scope of Article 2 of the tax treaties entered into by Brazil, i.e. from an economic and practical perspective, a treaty violation results in non-resident taxpayers losing their confidence in the behavior of the other contracting state, as the tax treatment applicable to their investments may be suddenly changed through unilateral and uncoordinated action. In Brazil, Article 98 of the CTN expressly provides that international tax treaties take precedence over national tax legislation.
This fundamental principle is complemented by Article 27 of the Vienna Convention, according to which "a party may not rely on the provisions of its domestic law as a justification for not performing a treaty". Nevertheless, it is important to remember that the structure and operation of tax treaties requires coordination between international tax law and national law.
INTERACTION BETWEEN INTERNATIONAL AND NATIONAL LAW
China, Finland, Israel, Korea (Rep.), Mexico, the Netherlands, South Africa and Ukraine, a possible interpretation of section 11 of the Act would be to regard it as an official interpretation of the concept of federal income tax. As noted in section 3.2.2., the tax treaties concluded by Brazil typically adopt a simplified wording in article 2(2), stating that "the taxes subject to this Convention are. Considering the fact that the inclusion of the CSLL in the substantive scope of a tax treaty does not have negative effects on Brazilian taxpayers, foreign taxpayers or even the other contracting state, article 11 of the law can again be considered a legislative interpretation of the term "federal income tax" as used in the wording of this treaty provision.
THE CSLL: POTENTIAL CONFLICT THE BETWEEN CONTRACTING STATES
In this case, the profit attributable to the PE in Brazil would be subject to the IRPJ and CSLL introduced by Brazil, and the other contracting country would have to use Article 23 of the tax treaty with Brazil to grant an exemption or tax credit. , depending on the method adopted in the contract provision. Consequently, if such a situation were to ultimately arise in practice, the other Contracting State would have to interpret the material scope of the tax treaty on the basis of the general rule of treaty interpretation. Based on this, it can be concluded that the idea that Article 11 of the Act represents the official interpretation of the concept of federal income tax does not cause any negative effects for the other contracting state.
For the purposes of this Article, it is not necessary to discuss whether priority should be given to an independent interpretation or to the domestic law of the Contracting State applying the tax treaty. What is particularly important to emphasize here is that the use of law to interpret the concept of federal income tax in tax treaties concluded by Brazil does not prejudice the other contracting state, therefore the meaning of national law can be used for interpretation.
THE CSLL: STATIC OR DYNAMIC INTERPRETATION OF TAX TREATIES?
On the other hand, the reference to domestic laws can serve to prevent the remaining double taxation in Brazil, which is the probable reason why the National Congress voluntarily decided to adopt an interpretative law stating that CSLL is included in the material scope of the tax treaties concluded by Brazil. In this respect, the application of the law is in accordance with the object and purpose of the tax treaty as a whole, since the inclusion of the CSLL in its objective scope contributes to the goal of avoiding double taxation. As a result, another country is unlikely to agree to include CSLL in the material scope of the tax treaty.
As a result, with regard to tax treaties predating the 1995 version of the OECD model, Contracting States must take into account their domestic law as it stood at the time the tax treaty was concluded, rather than when the treaty provision is applied. Instead, the reference to national law in determining the taxes covered by Article 2 of a tax treaty is perfectly feasible, either because the material scope interacts strongly with the domestic tax system of each Contracting State or because the lack of negative consequences arising from the interpretation of undefined terms based on the law.
TAXES ONLY COVERED BY A TAX TREATY?
For this reason, when interpreting a particular tax agreement, conclusions can only be drawn from other tax agreements concluded by the same state with great caution. 60. In that case, it is no longer necessary to resort to parallel tax treaties to include the CSLL within the substantive scope of the tax treaties entered into by Brazil. When considering the possible relevance of parallel tax treaties in the interpretation of other tax treaties, it is generally argued that the other tax treaties entered into by the same contracting state are part of the law of.
As part of Brazilian domestic law, such a Decree may be used to support the use of parallel tax treaties. However, since Article 11 of the law expressly states that the CSLL must be included in the material scope of all tax treaties concluded by Brazil, it seems unnecessary to use parallel tax treaties in this particular case.
CONCLUSIONS
In this sense, it is argued that Article 3(2) of such tax treaties is not necessarily limited to national domestic laws, as it is broad enough to include other tax treaties,61 which, at least in the case of Brazil, are entered into by the president, approved by the National Congress, ratified at the international level, and then published as a presidential decree.
