Brazil–Australia
Tax Guide
A practical guide to the tax framework governing transactions, investments, and individuals operating between Brazil and Australia.
Contact UsAustralian imputation credits reduce the effective cost of repatriation. That is the most significant structural feature of the Brazil–Australia relationship.
Brazil and Australia have no bilateral tax treaty in force. Each country taxes cross-border income flows under its own domestic rules, without treaty-reduced withholding rates, permanent establishment safe harbours, or a mutual agreement procedure for resolving transfer pricing disputes. However, Australia’s domestic tax system has a feature that meaningfully reduces the effective double tax burden on Brazil–Australia investment structures compared with other non-treaty jurisdictions: fully franked dividends distributed by an Australian holding company carry no Australian withholding tax, since attached franking credits satisfy the withholding obligation. This means that Brazilian IRRF at 10% on dividends flowing from Brazil to Australia is often the primary, and sometimes the only, corporate-level tax cost on the dividend repatriation chain.
This guide covers Brazilian withholding income taxes on outbound payments to Australian recipients, how those taxes stack on a single transaction, Australian income tax on Brazil-sourced income (including the foreign income tax offset and the CFC rules), transfer pricing, and key structuring considerations. Brazil’s IRRF at 10% on dividends under Law 15,270/2025 is the primary withholding cost on the Brazilian side of a dividend flow. For advice specific to your situation, contact us.
Having no DTA does not mean being double-taxed, but it does mean paying more attention.
Australia has one of the most extensive DTA networks of any country. Brazil is a notable gap. The practical consequences are more limited than they might appear, because Australia’s foreign income tax offset (FITO) under Division 770 of the ITAA 1997 prevents double taxation on the same income in the majority of well-structured arrangements, and the imputation system reduces the effective cost of repatriation significantly for investors who have generated sufficient franking credits at the Australian level.
Without a DTA, each country applies its domestic rates in full and relief from double taxation depends on unilateral provisions. For Australian companies, the FITO generally allows Brazilian IRRF to be credited against Australian income tax on the same income, subject to the FITO cap. The more significant constraint is the absence of a mutual agreement procedure: if the Australian Taxation Office (ATO) and the Federal Revenue Department (Receita Federal do Brasil) adjust the same transfer-priced transaction in different directions, the resulting double taxation must be resolved through domestic proceedings in each country.
Full Brazilian IRRF rates apply; FITO offsets most double taxation
Brazil’s IRRF applies at statutory rates on payments to Australian recipients (10% on dividends, 15% on interest, 15% on royalties and technical services, up to 25% on services). Australia’s foreign income tax offset (FITO) generally allows IRRF to be credited against Australian income tax on the same income, subject to the FITO cap. For most well-structured income streams, the combined cost does not materially exceed the Australian tax rate.
Residence and permanent establishment under domestic law
Tax residence and whether each entity has a taxable presence in the other country are determined by each country’s own legislation. The risk of accidental Brazilian permanent establishment through Australian executive decisions or board activities affecting the Brazilian operations should be assessed, particularly for wholly owned Brazilian subsidiaries managed from Australia.
No MAP: transfer pricing disputes resolved domestically
Both countries apply OECD arm’s-length transfer pricing rules, but without a mutual agreement procedure (MAP), any dispute between the ATO and the Federal Revenue Department over the same transaction must be resolved through domestic proceedings. Only unilateral APAs are available; bilateral APAs require a DTA with a MAP provision.
Franking credits reduce the effective cost of repatriation
Australian companies that have paid sufficient corporate tax can distribute fully franked dividends without any Australian withholding tax obligation, since the attached franking credits satisfy the withholding requirement. For an Australian company owning a Brazilian subsidiary, dividends received from Brazil (net of 10% IRRF) can be on-distributed to the ultimate shareholders free of Australian withholding, if sufficient franking credits have been generated.
Information exchange. Both Brazil and Australia participate in the OECD Common Reporting Standard (CRS) and are signatories to the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The ATO and the Federal Revenue Department (Receita Federal do Brasil) exchange financial account data on their respective residents annually. The absence of a DTA does not reduce the visibility of cross-border structures to either tax authority.
The main taxes that affect cross-border operations
The following taxes arise in virtually every substantive business relationship between Australian and Brazilian entities. Each operates independently; satisfying one obligation does not reduce or eliminate any other.
Brazilian corporate income tax: IRPJ and CSLL
Brazilian companies are subject to Corporate Income Tax (Imposto de Renda das Pessoas Jurídicas, IRPJ) at 15%, with a 10% surtax on annual taxable income exceeding R$240,000, and Social Contribution on Net Income (Contribuição Social sobre o Lucro Líquido, CSLL) at 9% for most companies. The combined standard rate under the Actual Profit regime is effectively 34%. Many companies qualify for the Deemed Profit regime and pay considerably less.
Australian income tax: corporate rate and CFC rules
Australian resident companies pay income tax at 30% on taxable income (25% for base rate entities with aggregated turnover below AUD 50 million). Australia taxes its residents on worldwide income. Australian companies with Brazilian subsidiaries must consider the foreign income tax offset (FITO) and the controlled foreign company (CFC) rules under Part X of the ITAA 1936, which may attribute certain Brazilian earnings to the Australian parent before distribution.
Brazilian withholding income tax (IRRF) on outbound payments
Brazil imposes Withholding Income Tax (Imposto de Renda Retido na Fonte, IRRF) on payments to non-residents. Key rates: dividends 10% (Law 15,270/2025); interest 15%; royalties and technical services 15%; general services 25%. Australia is not on Brazil’s list of low-tax jurisdictions, so the elevated 25% rate does not apply to standard Australian structures. With no DTA, Australian recipients cannot reduce these rates.
Transfer pricing: dual compliance obligations
Both countries apply OECD arm’s-length transfer pricing rules. Brazil’s regime was reformed by Law 14,596/2023. Australia applies OECD-aligned rules under Subdivision 815-B of the ITAA 1997. Related-party transactions between Australian and Brazilian entities must independently satisfy both regimes. Without a bilateral MAP, disputes cannot be resolved bilaterally.
Brazilian indirect taxes: PIS, COFINS, ICMS and ISS
Brazilian businesses face a layered indirect tax burden: PIS (0.65–1.65%) and COFINS (3–7.6%) on gross revenue; ICMS (a state-level consumption tax similar to GST, typically 12–18%) on goods and inter-state services; and ISS (municipal services tax, 2–5%) on services. Cross-border service payments from Brazil to Australian providers attract PIS/COFINS-Import on the Brazilian side. These are not creditable by the Australian recipient and represent a real additional cost.
Australian GST on cross-border supplies
Australian Goods and Services Tax (GST) at 10% applies to taxable supplies made in Australia. Cross-border services supplied to Brazilian businesses are generally GST-free if the recipient is a non-resident not in Australia at the time of supply, under the export of services provisions in the A New Tax System (GST) Act 1999. Australian GST and Brazil’s incoming CBS/IBS system are structurally comparable destination-principle consumption taxes.
IOF: Brazil’s financial transactions tax
Brazil’s Tax on Financial Transactions (Imposto sobre Operações Financeiras, IOF) applies to foreign exchange transactions, credit operations and insurance. Cross-border loan transactions attract IOF on the foreign exchange leg. IOF on loan proceeds was reduced to 0% for loans exceeding 180 days following a 2022 reform. Capital contributions in cash attract IOF at 0.38% on the exchange operation.
The 34% headline rate is not what most Brazilian companies actually pay.
The 34% combined IRPJ/CSLL rate applies under the Actual Profit regime (Lucro Real), where tax is calculated on audited net profit after allowable deductions. Many Brazilian companies instead use the Deemed Profit regime (Lucro Presumido), which produces substantially lower effective rates and has important implications for Australian investors modelling their FITO position and Pillar Two exposure.
Actual Profit regime (Lucro Real)
Mandatory for financial institutions and companies with annual gross revenue above R$78 million. Tax is calculated on audited net profit after deductions. IRPJ at 15% plus 10% surtax on income over R$240,000 per year; CSLL at 9%. Combined headline rate: 34% of taxable profit. Available by election to any company regardless of size.
Deemed Profit regime (Lucro Presumido)
Available to companies with annual gross revenue up to R$78 million. Tax base is a fixed percentage of gross revenue. Services: 32% deemed margin, producing effective combined IRPJ/CSLL on revenue of roughly 11–14%. Commerce and industry: 8% deemed margin, roughly 3–5% on revenue. A highly profitable service company may pay considerably less than 34% of actual profit.
FITO and Pillar Two implications. A Brazilian entity on the Deemed Profit regime may carry a low effective tax rate relative to its actual profitability. For Australian shareholders, this affects the FITO calculation on dividends and the Pillar Two analysis: Australia enacted its Pillar Two global minimum tax rules under the Treasury Laws Amendment (Global Minimum Tax) Act 2024, effective for income years beginning on or after 1 January 2024. Australian-headquartered multinationals with Brazilian subsidiaries should assess GloBE exposure where the Brazilian entity is taxed under the Deemed Profit regime, as its effective tax rate may fall below the 15% floor despite Brazil’s 34% headline rate.
Brazilian withholding income taxes on payments to Australian recipients
Brazil imposes Withholding Income Tax (Imposto de Renda Retido na Fonte, IRRF) on most categories of income paid to non-resident recipients, including Australian entities and individuals. The IRRF is withheld by the Brazilian payer and remitted to the Federal Revenue Department (Receita Federal do Brasil). Australia is not on Brazil’s list of low-tax jurisdictions (paraísos fiscais), so standard rates apply.
| Payment type | IRRF rate | Notes |
|---|---|---|
| Dividends | 10% | Law 15,270/2025 introduced a 10% withholding income tax on dividends remitted abroad, effective from 1 January 2026. Australian shareholders should review whether this IRRF qualifies as a creditable foreign income tax for FITO purposes under s.770-10 of the ITAA 1997. |
| Interest | 15%Standard rate | Interest paid to non-residents is generally subject to 15% IRRF. A rate of 25% applies where the beneficiary is resident in a low-tax jurisdiction under Brazilian rules. Australia is not a low-tax jurisdiction for Brazilian purposes. |
| Interest on Net Equity (JCP) | 17.5% | Interest on Net Equity (Juros sobre Capital Próprio, JCP) is a Brazilian mechanism allowing notional interest deductions on equity. The IRRF rate on JCP payments to non-residents was increased to 17.5% by Complementary Law 224/2025. |
| Royalties and technical services | 15%CIDE may also apply | Royalties for technology transfer and technical services attract 15% IRRF. The Economic Intervention Contribution (Contribuição de Intervenção no Domínio Econômico, CIDE) of 10% under Law 10,168/2000 may also apply on technology remittances, borne by the Brazilian payer on top of the contract price. |
| Services (general) | 25% | Remuneration for services rendered by non-resident individuals generally attracts 25% IRRF. Services rendered by non-resident legal entities may be subject to 15% or 25% depending on the nature and structure of the payment. |
| Capital gains | 15–22.5% | Capital gains realised by non-residents on Brazilian assets are subject to a progressive IRRF schedule: 15% up to BRL 5 million, rising to 22.5% above BRL 30 million. The Australian seller is also subject to Australian CGT on the same gain, with a FITO available for Brazilian IRRF paid, subject to the FITO cap. |
Other Brazilian taxes that apply alongside the IRRF
IOF (Tax on Financial Transactions)
IOF applies to the foreign exchange transaction associated with a cross-border payment. The rate varies by transaction type and tenor and is subject to frequent change by executive decree. It is borne by the Brazilian party executing the currency conversion.
PIS-Import and COFINS-Import
Services imported into Brazil attract PIS-Import and COFINS-Import under Law 10,865/2004. The standard non-cumulative rates are 1.65% (PIS-Import) and 7.6% (COFINS-Import), totalling approximately 9.25% of the contract value. Companies on the cumulative basis pay 0.65% and 3% respectively. These contributions are levied on the Brazilian importer and are borne in addition to the contract price.
ISS (Municipal Services Tax)
ISS applies to imported services at rates between 2% and 5%, depending on the municipality and the classification of the service. It is assessed on the Brazilian payer on the gross contract value.
CIDE (Economic Intervention Contribution)
CIDE at 10% applies to technology transfer and technical service payments remitted abroad. It is borne by the Brazilian payer on top of the contract value, not withheld from the Australian party’s receipt.
Indirect taxes reform: transitional period. 2026 is the first transitional year of Brazil’s new dual-GST system, introduced by Constitutional Amendment 132/2023 and regulated by Complementary Law 214/2025. Reporting continues under PIS/COFINS while new Contribuição sobre Bens e Serviços (CBS, a federal tax) and Imposto sobre Bens e Serviços (IBS, a state and municipal tax) fields are tested. Full abolition of PIS and COFINS begins in 2027, with IBS replacing ICMS and ISS through 2033. CBS and IBS are structurally comparable to Australia’s GST. See our Brazil tax reform guide for a full overview.
How Brazilian taxes stack up on a single transaction
When a Brazilian entity makes a payment to an Australian recipient, multiple Brazilian taxes can apply simultaneously. The IRRF reduces what the Australian party receives; additional taxes (PIS-Import, COFINS-Import, ISS, CIDE, IOF) increase what the Brazilian party pays. The combined effect makes the true cost substantially higher than the face value of the contract.
The examples below use a base contract value of AUD 100,000 and the standard non-cumulative PIS-Import and COFINS-Import rates. IOF is excluded given its variability. The Australian income tax figures use a simplified 30% corporate rate and do not account for CFC adjustments discussed in the next section.
Example 1: Technical services fee
AUD 100,000 paid by a Brazilian company to an Australian service provider
Example 2: Technology royalties
AUD 100,000 royalty paid by a Brazilian licensee to an Australian licensor
Example 3: Dividend distribution
AUD 100,000 dividend remitted by Brazilian subsidiary to Australian parent
Example 4: Intercompany interest payment
AUD 100,000 interest paid by Brazilian subsidiary to Australian parent lender
Importing physical goods into Brazil
The examples above apply to financial flows and services. Physical goods exported from Australia into Brazil face a separate and cumulative customs and indirect tax regime. Goods imports attract Import Tax (Imposto de Importação, II), the Tax on Industrialised Products (Imposto sobre Produtos Industrializados, IPI), PIS-Import and COFINS-Import at the goods rates (2.1% and 9.65% respectively, higher than the 1.65%/7.6% service rates), and ICMS, the state-level consumption tax, calculated on a grossed-up base that includes all other taxes. Australia has no free trade agreement with Brazil, so the full Mercosur Common External Tariff (TEC) applies. The combined burden typically adds 40–70% or more to the CIF value. For a full breakdown, see our Brazil Tax Guide.
Example 5: Merchandise import
AUD 100,000 CIF value of industrial goods shipped from Australia to Brazil (illustrative tariff rates)
These are simplified illustrations. The actual tax burden depends on the classification of the payment, the applicable FITO cap, whether the Brazilian entity is on the Actual Profit or Deemed Profit regime, IOF rates at the time of the currency conversion, the availability of the 50% CGT discount for assets held over 12 months by individuals and trusts, and the impact of Brazil’s indirect taxes reform on PIS/COFINS-Import obligations during the transition. Merchandise import rates must be verified by NCM code. These figures illustrate the stacking effect and are not a substitute for transaction-specific advice.
Australian taxation of Brazil-sourced income
Australia taxes its residents on worldwide income. Brazil-sourced income received by Australian residents is subject to Australian income tax, with relief available through the foreign income tax offset (FITO) under Division 770 of the ITAA 1997. Three mechanisms are particularly significant: the FITO, the CFC rules, and the CGT discount on disposal of Brazilian assets held for more than 12 months.
Foreign income tax offset (FITO)
Australian residents who pay foreign income tax on foreign-sourced income may claim a dollar-for-dollar offset against their Australian income tax liability under s.770-10 of the ITAA 1997. The FITO is limited to the Australian tax that would otherwise be payable on the foreign income (the “FITO limit”). Brazilian IRRF paid on dividends, interest, and royalties generally qualifies as a creditable foreign income tax, provided the income is included in the Australian taxpayer’s assessable income. Where the FITO exceeds the FITO limit on a particular income stream, excess credits are lost and cannot be carried forward or back.
CFC rules
The Australian CFC rules under Part X of the ITAA 1936 may attribute certain income of a Brazilian CFC to an Australian controller before any distribution is made. A Brazilian company is a CFC if Australian residents collectively control more than 50% of the voting power or assets. The CFC rules principally target “tainted income” (broadly, passive income such as interest, rent, royalties, and dividends from non-active subsidiaries) earned by the CFC. Active business income generally escapes attribution under the active income test. An annual assessment of tainted income is required for all Australian controllers of Brazilian CFCs.
Capital gains: the 50% CGT discount
Australian resident companies are not entitled to the 50% CGT discount. An Australian company disposing of shares in a Brazilian company will recognise a capital gain for Australian purposes, reduced by a FITO for Brazilian IRRF paid on the same disposal, subject to the FITO cap. Australian individuals and trusts holding Brazilian assets for more than 12 months may be entitled to reduce the net capital gain by 50% under Subdivision 115-A of the ITAA 1997. The FITO cap must be modelled carefully in that case, as it is based on the Australian tax on the full (pre-discount) foreign income.
Dividend franking: the imputation offset. When an Australian company receives a dividend from its Brazilian subsidiary (net of 10% Brazilian IRRF), it includes the gross amount in assessable income and claims a FITO for the IRRF. Having paid Australian corporate tax at 30% on those profits (net of the FITO), the Australian company can frank its own dividends to the extent of that corporate tax paid, enabling Australian shareholders to receive dividends with attached franking credits that offset their personal tax liability. This means the Brazilian IRRF ultimately flows through as a reduction in the company’s available franking credits, not as a separate additional tax cost at the shareholder level.
Transfer pricing: two OECD-aligned systems without a MAP
Both Brazil and Australia now apply transfer pricing rules aligned with the OECD arm’s-length standard. The absence of a DTA means there is no mutual agreement procedure to resolve disputes arising from transfer pricing adjustments in either country.
Brazil’s new transfer pricing rules
Law 14,596/2023 and IN RFB 2,161/2023 replaced Brazil’s former fixed-margin transfer pricing system with rules fully aligned with the OECD Transfer Pricing Guidelines, effective from 2024. For the first time, Australian and Brazilian transfer pricing analysis operates from the same conceptual starting point, though compliance remains bilateral and independent.
Australia’s transfer pricing rules
Australia’s transfer pricing rules under Subdivision 815-B of the ITAA 1997 follow the OECD arm’s-length standard. The ATO requires contemporaneous documentation for significant international related-party dealings, with penalties for inadequate documentation regardless of whether an adjustment is ultimately made. Australian entities with international related-party dealings above AUD 2 million must lodge the International Dealings Schedule (IDS). Country-by-Country Reporting is required for groups with consolidated revenue above AUD 1 billion.
Thin capitalisation. Australia’s thin capitalisation rules, amended substantially from 1 July 2023, now use a fixed ratio test (net debt deductions capped at 30% of EBITDA) as the default, replacing the former asset-based safe harbour. See the ATO’s thin capitalisation guidance for the updated rules. Brazil limits interest deductions on related-party debt under Law 12,249/2010. Intercompany loan arrangements between Australian and Brazilian entities must satisfy both regimes simultaneously. The absence of a bilateral APA mechanism means all advance certainty must be obtained through each country’s unilateral APA programme independently.
Structuring considerations for Australian investors in Brazil
In the absence of a DTA, the holding structure chosen for an Australian investment in Brazil has a direct and material impact on the overall tax burden and on the availability of the FITO and the CGT discount.
Holding structure
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Direct Australian holding The simplest structure. The Australian corporate shareholder will receive dividends net of 10% IRRF under Law 15,270/2025, creditable via the FITO against Australian income tax. The Brazilian subsidiary will be assessed for CFC status; active business subsidiaries will generally pass the active income test. Australian CGT applies on disposal of the Brazilian shares, with a FITO for Brazilian IRRF on the same disposal.
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Intermediate DTA-country holding Routing the investment through a jurisdiction that has both a DTA with Brazil and an acceptable tax relationship with Australia can reduce IRRF on outbound flows from Brazil. Singapore, the Netherlands, and the UAE each have DTAs with Brazil. The intermediate structure must satisfy Brazil’s beneficial ownership and anti-avoidance rules and must not create an unacceptable additional tax cost at the intermediate level.
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Brazilian holding (Ltda. or S.A.) Interposing a Brazilian holding company consolidates local operations and defers the 10% IRRF, which applies only on remittances abroad under Law 15,270/2025, not on distributions between Brazilian entities. Foreign investment must be registered with the Central Bank of Brazil.
Key takeaways for Australian investors
Assess CFC status before investing
Any Australian investor acquiring a controlling interest in a Brazilian company should assess CFC status and the availability of the active income test before completing the investment. Annual compliance is required for all Australian controllers of Brazilian CFCs.
Register the investment with the Central Bank of Brazil
Foreign direct investment in Brazil must be registered with the Central Bank of Brazil. Correct registration is a precondition for the repatriation of capital and the remittance of profits.
Model the FITO cap on disposal
On disposal of a Brazilian subsidiary, both Brazilian IRRF (15–22.5%) and Australian CGT apply. The FITO cap limits the offset to the Australian tax on the same income. Where the 50% CGT discount applies (for individuals and trusts), the cap is halved, so excess IRRF credits may be lost. Pre-disposal modelling is essential.
No social security totalisation agreement
Brazil and Australia do not have a social security totalisation agreement. Individuals working in one country for an employer based in the other may be required to contribute to both countries’ social security systems simultaneously, significantly increasing total employment costs.
This guide is a general overview only and does not constitute legal or tax advice. Tax laws in both countries change frequently, including legislative reforms currently in progress, and the information in this guide reflects the position as understood at the time of publication. The specific tax treatment of any transaction depends on the facts, the structure adopted, and the current state of the law in each jurisdiction. Obtain specific legal and tax advice before structuring any cross-border transaction.
Need advice on your Brazil–Australia tax structure?
This guide provides general information only. The interaction of Brazilian and Australian tax rules in the absence of a DTA requires careful, transaction-specific analysis. Contact us to discuss your situation.
