Brazil–United States
Tax Guide
A practical guide to the tax framework governing transactions, investments, and individuals operating between Brazil and the United States.
Contact UsThe Brazil–US tax relationship in the absence of a treaty.
The United States and Brazil are two of the largest economies in the Western Hemisphere, yet they remain without a bilateral tax treaty. This gap creates significant complexity for investors, companies, and individuals with interests in both countries, requiring reliance on unilateral relief mechanisms under the domestic law of each jurisdiction.
This guide covers Brazilian withholding income taxes on outbound payments, how those taxes stack on a single transaction, US taxation of Brazil-sourced income, transfer pricing, the treatment of individuals, and key structuring considerations. 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 States and Brazil are two of the largest economies in the Western Hemisphere, yet they have never concluded a bilateral tax treaty. Negotiations began in the 1990s but stalled over structural differences between Brazil’s hybrid treaty model and the US Model Income Tax Convention. The absence of a treaty is a practical reality that most participants in this bilateral relationship navigate successfully, but it requires proactive structuring and a clear understanding of both countries’ domestic rules.
The foreign tax credit (FTC) under IRC sections 901–909 is the primary mechanism for avoiding double taxation on Brazil–US income flows. In most well-structured arrangements, Brazilian taxes paid, including the 10% dividend withholding tax under Law 15,270/2025 and the 15% IRRF on interest and royalties, are creditable against US federal income tax, producing a combined burden that generally does not exceed the higher of the two countries’ rates. The more significant constraints are the absence of a mutual agreement procedure for resolving transfer pricing disputes, and the overlay of US GILTI and Subpart F rules, which capture certain Brazilian profits before distribution and have no equivalent in most DTA jurisdictions.
Full statutory rates apply; FTC under IRC 901–909 provides relief
Brazilian IRRF and US withholding taxes (30% on dividends and royalties paid to non-residents) apply at full statutory rates with no treaty reduction. The US FTC generally allows Brazilian taxes to offset US federal income tax on the same income, subject to the FTC limitation and separate basket rules under IRC section 904.
GILTI and Subpart F apply to Brazilian CFCs
US corporations with Brazilian controlled foreign corporations (CFCs) are subject to GILTI and Subpart F rules that may bring Brazilian profits into US taxable income before any distribution is made. These regimes have no equivalent in most DTA jurisdictions and require modelling independently of the withholding tax analysis.
No MAP: transfer pricing disputes resolved domestically
Both countries apply OECD arm’s-length transfer pricing rules, but the absence of a mutual agreement procedure (MAP) means that if both the Federal Revenue Department and the IRS adjust the same transaction in different directions, the resulting double taxation must be resolved through domestic proceedings. Only unilateral APAs are available.
Information exchange is extensive regardless of treaty status
Brazil and the United States exchange financial account data under FATCA, participate in the OECD Common Reporting Standard (CRS), and since August 2025 exchange information spontaneously under a new Competent Authority Arrangement. The absence of a DTA does not reduce the visibility of cross-border structures to either tax authority.
Treaty negotiations. Renewed interest in a Brazil–US DTA is reported periodically. As of the date of this guide, no treaty is in force or at an advanced stage of ratification. Businesses should plan on the basis that the current no-treaty position will continue for the foreseeable future and monitor legislative developments in both countries.
The main taxes that affect cross-border operations
The following taxes arise in virtually every substantive business relationship between US 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, which also affects GILTI and Pillar Two analysis for US parents.
US federal corporate income tax, GILTI and Subpart F
US resident companies pay federal corporate tax at 21% on worldwide income. US corporations with Brazilian controlled foreign corporations (CFCs) are also subject to the Global Intangible Low-Taxed Income (GILTI) and Subpart F regimes under IRC sections 951–965, which may bring Brazilian profits into US taxable income before any distribution is made, independent of the withholding tax analysis.
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% (rising to 25% for low-tax jurisdictions; some passive US holding structures may qualify); royalties and technical services 15%; general services 25%. With no DTA, US 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 United States applies rules under IRC section 482 and Treasury Regulation section 1.482. Related-party transactions must independently satisfy both regimes. Without a mutual agreement procedure (MAP), disputes cannot be resolved bilaterally and only unilateral APAs are available.
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 (state VAT, typically 12–18%) on goods; and ISS (municipal services tax, 2–5%) on services. Cross-border service payments from Brazil to US providers attract PIS/COFINS-Import on the Brazilian side. These are not creditable as foreign income taxes under US rules and represent a real cost to the structure.
US branch profits tax and state and local taxes
A Brazilian company operating in the United States through a branch is subject to the US branch profits tax at 30% on after-tax earnings deemed repatriated to the Brazilian head office, without treaty reduction. US state and local income taxes add a further layer of tax not reduced by any Brazil–US bilateral instrument. Combined federal and state effective rates for US-sourced income can reach 25–30% or more depending on the state.
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. Short-term funding arrangements and capital contributions in cash attract IOF at varying rates.
Brazilian withholding income taxes on payments to US recipients
Brazil imposes Withholding Income Tax (Imposto de Renda Retido na Fonte, IRRF) on most categories of income paid to non-resident recipients, including US entities and individuals. The IRRF is withheld by the Brazilian payer and remitted to the Federal Revenue Department (Receita Federal do Brasil).
Withholding income tax (IRRF) rates
| Payment type | IRRF rate | Notes |
|---|---|---|
| Dividends | 10% | Law 15,270/2025 introduced a 10% withholding income tax on dividends remitted abroad. US shareholders should review their foreign tax credit (FTC) position under IRC sections 901–909, as this IRRF should generally be creditable. |
| 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. |
| 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. |
| Rental income | 15% | Rental income paid to non-resident individuals or entities is subject to 15% IRRF, withheld by the Brazilian payer. |
Other Brazilian taxes that apply alongside the IRRF
The IRRF is not the only Brazilian tax cost on cross-border payments. Depending on the nature of the transaction, the Brazilian payer may also be liable for the following, borne on top of the contract price.
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. The standard non-cumulative rates are 1.65% (PIS-Import) and 7.6% (COFINS-Import), totalling approximately 9.25% of the contract value for services. Companies on the cumulative basis pay reduced rates of 0.65% and 3% respectively. These contributions are levied on the Brazilian importer of services 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 US party’s receipt.
Indirect taxes reform: transitional period. 2026 is the first transitional year of Brazil’s new dual-VAT system. Companies must configure for dual compliance 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 on electronic invoices. Full abolition of PIS and COFINS begins in 2027, with IBS replacing ICMS and ISS through 2033. Once fully implemented, CBS and IBS will together operate as a broad-based value added tax structurally comparable to modern VAT systems internationally. See our Brazil tax reform guide for a full overview.
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 US investors modelling their returns and assessing GILTI 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 rather than actual profit. 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.
GILTI and Pillar Two implications. A Brazilian controlled foreign corporation (CFC) on the Deemed Profit regime may carry a low effective tax rate relative to its actual profitability. For US shareholders, this affects the GILTI high-tax exclusion analysis: where the Brazilian entity’s effective rate falls below 90% of the US corporate rate (currently 18.9%), GILTI inclusion may arise. It also affects Pillar Two: Brazil enacted its own minimum tax rules under Law 15,079/2024, and the interaction between US GILTI and Brazilian top-up tax requires careful modelling. US-headquartered multinationals with Brazilian subsidiaries should assess GILTI and GloBE exposure on an entity-by-entity basis.
How Brazilian taxes stack up on a single transaction
One of the most important features of the Brazil–US tax relationship is that multiple Brazilian taxes apply simultaneously to the same payment. The IRRF reduces what the US party receives; additional taxes (PIS-Import, COFINS-Import, ISS, CIDE, IOF) increase what the Brazilian party pays. The combined effect makes the true cost of a cross-border transaction substantially higher than the face value of the contract, often by 20–40% or more.
The examples below use a base contract value of USD 100,000. IOF is excluded given the variability of its rate. The US tax figures in examples 3 and 4 use a simplified 21% corporate rate and do not account for GILTI, Subpart F, or state taxes.
Example 1: Technical services fee
USD 100,000 paid by a Brazilian company to a US service provider
Example 2: Technology royalties
USD 100,000 royalty paid by a Brazilian licensee to a US licensor
Example 3: Dividend distribution
USD 100,000 dividend remitted by Brazilian subsidiary to US parent
Example 4: Intercompany interest payment
USD 100,000 interest paid by Brazilian subsidiary to US parent lender
Importing physical goods into Brazil
The examples above apply to financial flows and services. Physical goods exported from the United States 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 (which at 2.1% and 9.65% respectively are higher than the 1.65%/7.6% service rates), and ICMS, the state-level VAT, calculated on a grossed-up base that includes all other taxes. The United States has no free trade agreement with Brazil, and goods enter under the Mercosur Common External Tariff (TEC). The combined burden typically adds 40–70% or more to the CIF value depending on the product’s NCM tariff classification and destination state. The example below uses illustrative rates for typical industrial goods; actual rates must be verified by NCM code before importation. For a full breakdown of the Brazilian customs regime, see our Brazil Tax Guide.
Example 5: Merchandise import
USD 100,000 CIF value of industrial goods shipped from the United States to Brazil (illustrative tariff rates)
These are simplified illustrations. The actual tax burden on any transaction depends on a range of factors: the correct classification of the payment under Brazilian law, the IOF rate at the time of the currency conversion, the availability and basket limitations of the FTC, state and municipal variations in ISS rates, PIS/COFINS-Import obligations during the CBS/IBS transition, and the impact of GILTI, Subpart F, and US state and local taxes on the underlying Brazilian profits. The merchandise import example uses illustrative tariff rates that must be verified against the applicable NCM code. These figures are provided to illustrate the stacking effect, not as a substitute for transaction-specific advice.
US taxation of Brazil-sourced income
The United States taxes its citizens and resident aliens on worldwide income, and taxes US corporations on the income of their controlled foreign subsidiaries through the GILTI and Subpart F regimes. Brazil-sourced income is within scope.
US corporations investing in Brazil
A US corporation that invests in Brazil through a subsidiary will generally recognise Brazilian income for US tax purposes through one of two mechanisms.
Global Intangible Low-Taxed Income (GILTI)
GILTI applies to the net income of controlled foreign corporations (CFCs) not otherwise captured by Subpart F. Brazilian operating income of a CFC is generally subject to GILTI inclusion in the hands of the US shareholder, subject to a deduction under IRC section 250 and a foreign tax credit.
Subpart F income
Certain passive and mobile income (interest, dividends, rents, royalties, and related-party sales income) earned by a Brazilian CFC may constitute Subpart F income, currently includible by the US shareholder regardless of whether profits are repatriated.
Foreign tax credits
The primary mechanism for avoiding double taxation in the absence of a treaty is the US foreign tax credit (FTC). A US taxpayer who pays Brazilian income tax (including IRRF) may generally claim a credit against US tax liability for the Brazilian taxes paid, subject to the FTC limitation rules under IRC sections 901–909. Brazilian contributions such as PIS/COFINS are generally not creditable as foreign income taxes for US purposes, meaning they represent a true additional cost. By contrast, the 10% IRRF on dividends under Law 15,270/2025 should generally qualify as a creditable foreign income tax.
Branch profits tax and withholding on US inbound payments
Where a Brazilian company operates in the United States through a branch rather than a subsidiary, the US branch profits tax (currently 30%) applies to after-tax earnings deemed repatriated to the Brazilian head office. The 30% statutory rate applies in full in the absence of a treaty reduction. For payments from US entities to Brazilian recipients, US domestic withholding taxes at 30% may apply on fixed or determinable annual or periodic income.
FATCA and the August 2025 Competent Authority Arrangement. Brazilian financial institutions are subject to FATCA under the intergovernmental agreement between Brazil and the United States. On 27 August 2025, the US and Brazil signed a new Competent Authority Arrangement providing for spontaneous and proactive exchange of tax information between the two authorities. This substantially expands the sharing of data between the IRS and the Federal Revenue Department (Receita Federal do Brasil) beyond what the prior TIEA and FATCA required. Opacity is no longer a practical position for US persons with Brazilian interests, or Brazilian nationals with US financial accounts.
Transfer pricing: Brazil’s new OECD-aligned rules
Brazil has historically applied a fixed-margin transfer pricing system that diverged fundamentally from OECD standards. Law 14,596/2023 and IN RFB 2,161/2023 replaced this system with rules aligned with the OECD arm’s-length standard, with full effect from 2024.
The new arm’s-length standard
Brazil’s new transfer pricing rules adopt the arm’s-length principle and the OECD Transfer Pricing Guidelines. The main changes for US–Brazil related-party transactions include:
- 1Functional and comparability analysis Pricing is determined by reference to a controlled transaction’s functions, assets, and risks, compared against comparable uncontrolled transactions, consistent with the approach under US Treasury Regulation section 1.482.
- 2Accepted OECD methods The new rules recognise the full suite of OECD-approved methods: CUP, resale price, cost-plus, TNMM, and profit split. The “best method” concept applies.
- 3Intangibles and intragroup services Rules on hard-to-value intangibles and low-value-adding services follow OECD guidance. The absence of a MAP mechanism to resolve disputes remains a gap.
- 4Country-by-Country Reporting (CbCR) Brazilian members of multinational groups are required to submit CbCR reports to the Federal Revenue Department (Receita Federal do Brasil), which participates in BEPS and exchanges CbCR data with the IRS.
Thin capitalisation. Brazil imposes thin capitalisation rules restricting the deductibility of interest on related-party debt. Where the Brazilian borrower’s related-party debt exceeds a prescribed debt-to-equity ratio, interest deductions are disallowed. These rules interact with the new transfer pricing framework and require careful attention when structuring debt financing between US parents and Brazilian subsidiaries.
Individuals: US citizens in Brazil and Brazilian nationals in the United States
The treatment of individuals crossing between Brazil and the United States is particularly complex in the absence of a treaty, as both countries may assert full tax residence simultaneously.
US citizens and Green Card holders in Brazil
The United States taxes its citizens and permanent residents on worldwide income regardless of where they reside. A US citizen living and working in Brazil is therefore subject to Brazilian income tax on Brazil-sourced income and also subject to US income tax on the same income. Three domestic US mechanisms provide partial relief.
| Relief mechanism | Applicable to | Key limitation |
|---|---|---|
| Foreign Earned Income Exclusion (FEIE) IRC § 911 |
US citizens and resident aliens abroad | Limited to employment and self-employment income; investment income is excluded. The 2026 exclusion amount is approximately USD 130,000 (indexed annually for inflation). |
| Foreign Tax Credit (FTC) IRC §§ 901–909 |
US persons paying creditable foreign taxes | Brazilian income tax generally qualifies. The credit is limited to US tax on foreign-source income; excess credits can be carried back one year or forward ten years. |
| Foreign Housing Exclusion/Deduction | US citizens abroad with qualifying housing costs | Supplements the FEIE; limited by the IRS cost-of-living index for São Paulo or the relevant city, determined annually. |
Brazilian tax residents in the United States
A Brazilian national who establishes tax residence in the United States remains subject to Brazilian taxation until the formal Saída Definitiva process is completed with the Federal Revenue Department (Receita Federal do Brasil). Until this is done, for the first 12 months of residing abroad the individual remains subject to Brazilian income tax on worldwide income, producing genuine double taxation with no treaty mechanism to resolve it. Brazilian residents departing permanently for the United States should take advice on the Saída Definitiva process before their departure date.
US exit tax
US citizens who renounce their citizenship and long-term permanent residents who relinquish their Green Cards may be subject to the US exit tax under IRC section 877A if they meet the relevant net worth or tax liability thresholds. This is an important consideration for Brazilian nationals who have held Green Cards for an extended period and are returning to Brazil.
Social security totalisation. Brazil and the United States do not have a social security totalisation agreement. Individuals working in one country for an employer based in the other may therefore be required to contribute to both countries’ social security systems simultaneously. For US employers seconding employees to Brazil, Brazilian National Social Security Contributions (INSS) apply to Brazilian-payroll employees in addition to any continued US Federal Insurance Contributions Act (FICA) obligations, increasing total employment cost significantly.
Structuring considerations for US investors in Brazil
In the absence of a DTA, the holding structure chosen for a US investment in Brazil has a direct and material impact on the overall tax burden. Several considerations merit attention at the planning stage.
Holding structure
- •Direct US holding The simplest structure, but exposes dividend flows to 10% IRRF under Law 15,270/2025 and full US taxation, with relief available only through domestic FTC mechanisms. GILTI and Subpart F inclusion rules apply to the Brazilian subsidiary’s income.
- •Intermediate DTA-country holding Routing the investment through a jurisdiction that has both a DTA with Brazil and an acceptable tax relationship with the United States can reduce IRRF on outbound flows from Brazil and provide a MAP mechanism for transfer pricing disputes. This must be assessed carefully against Brazil’s beneficial ownership and anti-treaty-shopping rules.
- •Brazilian holding (Ltda. or S.A.) Consolidating Brazilian operations under a Brazilian holding company defers the 10% IRRF on dividends, which applies only on remittances abroad under Law 15,270/2025, not on distributions between Brazilian entities. The foreign investment must be registered with the Central Bank of Brazil.
Debt vs equity financing
Interest on qualifying debt is deductible at the Brazilian level, but IRRF at 15% applies on the outbound payment to the US lender. JCP payments are deductible but attract 17.5% IRRF under Complementary Law 224/2025. Dividends attract 10% IRRF under Law 15,270/2025. The interaction between Brazil’s thin capitalisation rules and the arm’s-length pricing of intercompany loans requires specific attention.
Capital gains planning
On a disposal of Brazilian assets, non-resident sellers are subject to IRRF on capital gains at rates of 15% to 22.5%, depending on the gain amount. The US seller will also recognise a capital gain for US purposes, with relief available only through the FTC mechanism. The timing and structuring of a disposal can affect the Brazilian tax characterisation and the crediting position in the United States.
Key takeaways for US investors
Structure early
The holding structure decision should be made before the investment is established. Restructuring after the fact can trigger Brazilian tax events and complicate the Central Bank of Brazil registration.
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.
Review FTC eligibility for dividend IRRF
The 10% IRRF on dividends under Law 15,270/2025 should generally qualify as a creditable foreign income tax. US shareholders should confirm their FTC position and model the net cost of repatriation under current rates.
Coordinate US and Brazilian advisers
In the absence of a DTA, the interaction between US and Brazilian tax rules requires coordinated legal and tax advice in both jurisdictions. My law firm works alongside US tax counsel on cross-border mandates.
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 US–Brazil tax structure?
This guide provides general information only. The interaction of US and Brazilian tax rules in the absence of a DTA requires careful, transaction-specific analysis. Contact us to discuss your situation.
This guide is prepared by D&Q Lawyers for general informational purposes only. It does not constitute legal or tax advice and should not be relied upon as such. Tax rates, legislation, and regulatory requirements are subject to change. Readers should obtain specific advice before taking any action in reliance on this material. © D&Q Lawyers.
