On 3 October 2024, the Brazilian government issued Interim Measure 1,262, introducing significant changes to the country’s tax system by establishing an Additional Social Contribution on Net Profit (CSLL) to ensure an effective minimum tax rate of 15%. This measure integrates Brazil’s tax policies with international anti-erosion standards (GloBE Rules), developed under the Inclusive Framework on BEPS, coordinated by the Organisation for Economic Co-operation and Development (OECD) and the G20.
The Interim Measure designates the Additional CSLL as a Qualified Domestic Minimum Top-up Tax (QDMTT), a complementary tax under GloBE Rules to ensure that income earned within a jurisdiction is taxed at a minimum rate of 15%.
If approved by Congress, the rule will take effect on 1 January 2025 and apply to Constituent Entities of Multinational Enterprise Groups with consolidated annual revenues of at least 750 million euros in at least two of the last four fiscal years.
The Additional CSLL will target profits classified as “surplus” under Brazilian accounting standards, excluding substance-based profits. The amount due will reflect the positive difference between the 15% minimum rate and the effective tax rate and will be proportionally allocated among Constituent Entities according to their excess profits. Payments must be made by the seventh month following the fiscal year’s close. Constituent Entities are required to provide all necessary information for calculating the Additional CSLL and will face financial penalties for noncompliance.
Regulatory Guideline 2,228, issued on the same day, details the concepts, calculation methodologies, simplification rules, and transitional regimes presented in the Interim Measure.
Particular concerns involve the Controlled Foreign Corporation (CFC) rules under Brazilian legislation, which govern the taxation of income earned by subsidiaries in low-tax jurisdictions, especially regarding their integration with the broader tax system. These rules may conflict with the new GloBE standards.
Glossary:
Interim Measure – a temporary law issued by the Executive Branch in Brazil, effective immediately but requiring congressional approval to become permanent.
CSLL (Social Contribution on Net Profit) – a federal tax in Brazil levied on corporate profits to fund social security programs.
Qualified Domestic Minimum Top-up Tax (QDMTT) – a supplementary tax under the GloBE Rules ensuring that income earned within a jurisdiction is taxed at a minimum effective rate of 15%.
GloBE Rules (Global Anti-Base Erosion Rules) – international tax guidelines developed by the OECD and G20 to prevent tax base erosion and profit shifting by multinational companies.
BEPS (Base Erosion and Profit Shifting) – strategies used by multinational enterprises to shift profits to low or no-tax jurisdictions, reducing their tax liabilities in high-tax countries.
Regulatory Guideline – detailed instructions or clarifications issued to implement or interpret specific laws or measures.
