Brazil Issues Guidelines for Calculating Deduction of Interest

SUNNYVALE, Calif. - Nov. 18, 2013 - PRLog -- Brazil recently issued guidelines for estimating the amount companies doing business in the country may deduct for interest payments on net equity, reports Nair & Co.’s International Tax Team. Prior to this clarification, there was some confusion as to whether interest on a company’s net equity was to be computed under the older Brazilian GAAP or the new Brazilian GAAP(BRGAAP) which is in line with IFRS, says Nair & Co.’s International Tax Services Team.

Generally speaking, payments like dividends or interest on net equity can be considered as repatriation of funds from Brazil. Payments of interest on net equity and expense for such payments may be, for corporate income tax purposes, deducted if the limitations imposed under Brazilian laws are maintained. The recent guidance also states that the calculation of interest on net equity is determined under old BRGAAP

Companies operating in Brazil are advised to carefully review policies related to interest on net equity payouts to identify potential risk and taxation exposure.

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