Brazil–United Kingdom
Tax Guide
A practical guide to the tax framework governing transactions, investments, and individuals operating between Brazil and the United Kingdom.
Contact UsThe UK does not withhold on dividends. That is the most significant structural feature of the Brazil–UK relationship.
Brazil and the United Kingdom 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, the UK’s domestic tax system has two features that significantly reduce the effective double tax burden on Brazil–UK investment structures compared with other non-treaty jurisdictions: the UK does not impose withholding tax on dividends paid to non-residents, and the Substantial Shareholding Exemption may exempt gains on disposal of qualifying Brazilian shareholdings from UK corporation tax entirely.
This guide covers Brazilian withholding income taxes on outbound payments to UK recipients, how those taxes stack on a single transaction, UK corporation tax on Brazil-sourced income (including the UK’s Controlled Foreign Companies regime), transfer pricing, and key structuring considerations. Brazil’s IRRF at 10% on dividends under Law 15,270/2025 remains 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.
The United Kingdom has one of the world’s most extensive DTA networks. Brazil is a conspicuous gap. Despite the scale of UK–Brazil trade and investment flows, no comprehensive tax treaty has been concluded. The practical consequences are more limited than they might appear, however, because two features of UK domestic tax law, the absence of dividend withholding tax and the Substantial Shareholding Exemption, provide structural relief that partially compensates for what a treaty would otherwise achieve.
Without a DTA, each country applies its domestic withholding rates in full and relief from double taxation depends on unilateral foreign tax credit provisions. For UK corporations, the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010) Part 2 provides a foreign tax credit mechanism that, in most cases, effectively eliminates double taxation on the same income. The more significant constraint is the absence of a mutual agreement procedure: if HM Revenue & Customs (HMRC) 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.
UK does not withhold on dividends: a structural advantage for UK holding structures
The UK imposes no withholding tax on dividends paid to non-residents, regardless of treaty status. For a UK investor holding a Brazilian subsidiary, this means that dividends received from Brazil (net of 10% Brazilian IRRF) can be redistributed from the UK holding company upward to the ultimate shareholders without any further UK withholding cost. This is the most significant structural feature of the UK–Brazil investment relationship.
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. A UK company is resident where it is incorporated or where its central management and control is exercised. Whether a Brazilian business creates a taxable presence in the UK is determined by UK domestic permanent establishment rules; most standard business arrangements do not create an unexpected presence.
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 HMRC 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.
Substantial Shareholding Exemption: gains on Brazilian shares may be UK tax-free
The Substantial Shareholding Exemption (SSE) under Schedule 7AC TCGA 1992 exempts gains on disposal of shares in qualifying companies from UK corporation tax, where the UK company has held at least 10% of the ordinary share capital for a continuous 12-month period and the investee is a trading company. Disposals of qualifying Brazilian subsidiaries may be entirely exempt from UK corporation tax, a material structural advantage.
Information exchange. Both Brazil and the UK participate in the OECD Common Reporting Standard (CRS) and are signatories to the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. HMRC 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 UK 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 (see Law 13,259/2016 and Law 9,718/1998 as amended). The combined standard rate under the Actual Profit regime is effectively 34%. Many companies qualify for the Deemed Profit regime and pay considerably less.
UK corporation tax
UK resident companies pay corporation tax at 25% on profits (the main rate, applying to profits over £250,000). Companies with profits below £50,000 pay at the small profits rate of 19%; a marginal rate applies between these thresholds. The UK taxes its residents on worldwide income. Dividends received from qualifying Brazilian subsidiaries may be exempt from UK corporation tax under the Part 9A CTA 2009 dividend exemption.
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%. The UK is not on Brazil’s list of low-tax jurisdictions, so the elevated 25% rate does not apply to standard UK structures. With no DTA, UK 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. The UK applies transfer pricing rules under Part 4 of TIOPA 2010. Related-party transactions 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, typically 12–18%) on goods; and ISS (municipal services tax, 2–5%) on services. Cross-border service payments from Brazil to UK providers attract PIS/COFINS-Import on the Brazilian side. These are not creditable against UK tax and represent a real additional cost.
UK VAT on cross-border supplies
UK Value Added Tax (VAT) at 20% applies to taxable supplies made in the UK. Exports of services to Brazilian businesses are generally outside the scope of UK VAT under the B2B “place of supply” rules, where the customer is registered for VAT (or equivalent) in Brazil. The UK VAT system and Brazil’s incoming CBS/IBS regime are both destination-principle consumption taxes, simplifying the analysis of where each applies.
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 UK investors modelling the UK dividend exemption 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.
UK dividend exemption and Pillar Two. Dividends received by a UK company from a qualifying Brazilian subsidiary may be exempt from UK corporation tax under the dividend exemption in Part 9A of CTA 2009 (broadly, where the UK company is “large” or where the dividend falls within an exempt class). Where the dividend exemption applies, the 10% Brazilian IRRF may be the only corporate-level tax cost on the dividend flow. A Brazilian entity on the Deemed Profit regime may carry a low effective tax rate, affecting Pillar Two analysis: the UK implemented Pillar Two with effect from accounting periods beginning on or after 31 December 2023 under the Multinational Top-up Tax Act 2023. UK-headed multinationals with Brazilian subsidiaries should assess GloBE exposure where the Brazilian entity is taxed under the Deemed Profit regime.
Brazilian withholding income taxes on payments to UK recipients
Brazil imposes Withholding Income Tax (Imposto de Renda Retido na Fonte, IRRF) on most categories of income paid to non-resident recipients, including UK entities and individuals. The IRRF is withheld by the Brazilian payer and remitted to the Federal Revenue Department (Receita Federal do Brasil). The UK 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. UK corporate shareholders should review whether this IRRF qualifies for credit under Part 2 of TIOPA 2010. Where the UK dividend exemption applies, the dividend may not be subject to UK corporation tax, in which case the FTC may be irrelevant. |
| 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. The UK 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% 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 UK Substantial Shareholding Exemption may exempt the UK-side gain; the Brazilian IRRF on the same disposal still applies at source. |
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 (governed by Law 10,865/2004) and COFINS-Import. 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 UK 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. 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 a UK recipient, multiple Brazilian taxes can apply simultaneously. The IRRF reduces what the UK 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 USD 100,000 and the standard non-cumulative PIS-Import and COFINS-Import rates. IOF is excluded given its variability. The UK corporation tax figures use a simplified 25% rate and do not account for the UK CFC adjustments discussed in the next section.
Example 1: Technical services fee
USD 100,000 paid by a Brazilian company to a UK service provider
Example 2: Technology royalties
USD 100,000 royalty paid by a Brazilian licensee to a UK licensor
Example 3: Dividend distribution
USD 100,000 dividend remitted by Brazilian subsidiary to UK parent
Example 4: Intercompany interest payment
USD 100,000 interest paid by Brazilian subsidiary to UK parent lender
Importing physical goods into Brazil
The examples above apply to financial flows and services. Physical goods exported from the UK 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. The UK has no free trade agreement with Brazil. 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
USD 100,000 CIF value of industrial goods shipped from the UK to Brazil (illustrative tariff rates)
These are simplified illustrations. The actual tax burden depends on the classification of the payment, whether the UK dividend exemption applies (which may reduce the dividend example to a 10% IRRF cost only), the applicable UK FTC limitation under TIOPA 2010 Part 2, IOF rates at conversion, the Brazilian entity’s tax regime (Actual Profit or Deemed Profit), 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 are provided to illustrate the stacking effect, not as a substitute for transaction-specific advice.
UK taxation of Brazil-sourced income
The UK taxes its residents on worldwide income. Brazil-sourced income received by UK residents is subject to UK corporation tax, with relief available through the foreign tax credit under Part 2 of TIOPA 2010. Two specific reliefs are particularly significant: the dividend exemption and the Substantial Shareholding Exemption.
Dividend exemption
Dividends received by a UK company from a Brazilian subsidiary are generally exempt from UK corporation tax under Part 9A of the Corporation Tax Act 2009, where the dividend falls within one of the exempt classes. For large UK companies, most dividends from foreign subsidiaries are exempt regardless of the territory of the paying company. For smaller UK companies, the exemption depends on the dividend falling within a specific exempt class. Where the exemption applies, the 10% Brazilian IRRF under Law 15,270/2025 is the entire cross-border corporate tax cost on the dividend flow.
Substantial Shareholding Exemption (SSE)
Gains on disposal of shares in qualifying Brazilian companies are exempt from UK corporation tax under the Substantial Shareholding Exemption (Schedule 7AC TCGA 1992) (CTM27500), where:
- •The UK company has held at least 10% of the ordinary share capital of the Brazilian company (directly or through a group) for a continuous period of at least 12 months beginning not more than 6 years before the disposal;
- •The Brazilian company is a “trading company” or the holding company of a trading group at the time of disposal (broadly, a company whose business consists wholly or mainly of the carrying on of a trade).
Where the SSE applies, the gain on disposal of the Brazilian shares is wholly exempt from UK corporation tax. The Brazilian IRRF on the same disposal (at 15–22.5%) still applies at source and is not creditable against UK tax where there is no UK tax liability. The SSE is one of the most significant structural advantages of investing in Brazil through a UK holding company.
UK CFC rules
The UK Controlled Foreign Companies (CFC) rules under Part 9A of the Corporation Tax Act 2010 may impose a charge on a UK company in respect of the profits of a Brazilian CFC (broadly, a company controlled by UK residents in which UK residents together hold more than 50% of the profits or assets). The CFC rules apply only to specific categories of “UK-connected” profits (broadly, profits that have been artificially diverted from the UK), and most genuinely commercial Brazilian operating companies will not give rise to a CFC charge.
Foreign tax credit. Where UK corporation tax does arise on Brazilian income (e.g., where the dividend exemption does not apply, or on royalties and interest), a credit is available under Part 2 of TIOPA 2010 for the underlying Brazilian IRRF. The credit is limited to the UK corporation tax that would otherwise be payable on the same income. Excess credits are not refundable but may be carried back one year or forward indefinitely.
Transfer pricing: two OECD-aligned systems without a MAP
Both Brazil and the UK 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. Intercompany transactions between Brazilian and UK related parties are now tested against the arm’s-length standard using OECD-approved methods.
UK’s transfer pricing rules
The UK’s transfer pricing rules under Part 4 of TIOPA 2010 follow the OECD arm’s-length standard. HMRC may adjust the UK entity’s taxable income if the transfer price does not reflect arm’s-length terms. UK transfer pricing documentation requirements and the requirement to disclose international related-party arrangements on tax returns should be assessed for each UK–Brazil related-party transaction. HMRC’s International Manual (INTM413000 onwards) sets out HMRC’s approach to transfer pricing enquiries.
Country-by-Country Reporting. Both Brazil and the UK participate in the OECD BEPS Inclusive Framework and have implemented Country-by-Country Reporting. UK entities that are part of groups with consolidated revenue above £586 million (broadly the GBP equivalent of EUR 750 million) must file a CbCR report with HMRC. Brazil requires CbCR for groups exceeding BRL 2.26 billion. Both reports are exchanged between tax authorities, including HMRC and the Federal Revenue Department, under the OECD’s Multilateral Competent Authority Agreement.
Thin capitalisation. UK thin capitalisation rules under Part 4 of TIOPA 2010 restrict the amount of interest that a UK entity can deduct where it is funded by more related-party debt than an independent entity would carry. A UK subsidiary of a Brazilian parent must ensure its related-party debt level and interest rate satisfy the arm’s-length standard. HMRC’s thin capitalisation guidance (INTM413100) takes a facts-based approach rather than a fixed safe harbour ratio. Brazil limits interest deductions on related-party debt under Law 12,249/2010. Intercompany loan arrangements between UK and Brazilian entities must satisfy both regimes simultaneously, and 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 UK investors in Brazil
In the absence of a DTA, the holding structure chosen for a UK investment in Brazil has a direct and material impact on the overall tax burden. The UK’s domestic reliefs (dividend exemption, SSE, and zero dividend withholding) make the UK a genuinely competitive holding location for Brazilian investments even without a treaty.
Holding structure
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Direct UK holding The combination of the UK dividend exemption and zero UK dividend withholding makes a direct UK holding structure very competitive. The Brazilian subsidiary distributes a dividend net of 10% IRRF; the UK parent receives it free of UK corporation tax under the dividend exemption; no UK withholding applies on dividends redistributed upwards. On disposal of the Brazilian subsidiary, the SSE may exempt the entire gain from UK corporation tax. The CFC rules must be assessed, but most genuinely trading Brazilian subsidiaries will not give rise to a UK CFC charge.
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Intermediate DTA-country holding Routing the investment through a jurisdiction with a DTA with Brazil can reduce the 10% IRRF on dividends, which is the main residual Brazilian tax cost on a UK direct holding. Singapore, the Netherlands, and the UAE each have DTAs with Brazil. The economic substance and beneficial ownership requirements under Brazil’s anti-avoidance rules must be satisfied.
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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 UK investors
Verify dividend exemption conditions before structuring
The UK dividend exemption under Part 9A CTA 2009 should be confirmed for each dividend distribution. Where the exemption applies, the Brazilian 10% IRRF is the only corporate-level tax cost on the dividend flow, which is a significant structural advantage.
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.
Assess SSE eligibility before disposal
The Substantial Shareholding Exemption can exempt the entire UK corporation tax liability on a disposal of qualifying Brazilian shares. SSE eligibility (10%+ holding, 12 months, trading company) should be assessed at the time of the investment and monitored throughout the holding period.
No social security totalisation agreement
Brazil and the UK 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, 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–UK tax structure?
This guide provides general information only. The interaction of Brazilian and UK tax rules in the absence of a DTA requires careful, transaction-specific analysis. Contact us to discuss your situation.
