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Normative Expository Act No. 5 of June 16, 2014

Roberta P. Caneca
Mayer Brown LLP - São Paulo Office

Marina Cyrino
Mayer Brown LLP - Rio de Janeiro Office

June 30, 2014

Previously published on June 24, 2014

On June 16, 2014, Brazilian Tax Authorities enacted Normative Expository (“ADE”) Act No. 5, which revoked the ADE No. 1/2000. The ADE No. 1/2000 provided for the application of withholding tax in Brazil to payments of service fees to overseas, regardless of the existence of a Tax Treaty to Avoid Double Taxation (‘Tax Treaty”)

The new ADE determines that outbound payments of service fees to beneficiaries located in treaty countries in connection with technical services or technical assistance will be performed in accordance with the Tax Treaty, as follows (i) treated as royalties in case of a Protocol providing for the same treatment to technical services and technical assistance for purposes of the application of withholding tax, (ii) independent professions, or professional services, or independent professionals, in cases the technical services or technical assistance performed are related to the technical qualification of a person or group of persons ; or (iii) in all other cases, as business profit.

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The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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