Brazil plans to introduce a minimum tax rate of 15% for multinational companies starting in 2025. This new tax will take the form of an additional Social Contribution Tax on Net Income (CSLL).
The measure is in line with the OECD’s Base Erosion and Profit Shifting (BEPS) project. BEPS aims to combat tax planning strategies that exploit loopholes in tax rules to artificially shift profits.
Caio Malpighi, a tax lawyer at VBSO Advogados, explains the purpose of this global tax reform. It seeks to ensure that large multinational groups pay at least 15% tax regardless of where they operate.
Additionally, the goal is to prevent companies from shifting profits to low-tax jurisdictions. This practice often hurts tax collection in the countries where these corporations actually generate value.
The additional CSLL will apply to the adjusted net profit of multinational companies. This means they must pay the minimum rate regardless of any incentives or tax exemptions available.
Brazil’s approach aims to balance fair taxation with investment encouragement and value creation. The measure includes exemptions based on essential domestic activities.
Companies can exclude part of their profit related to tangible assets and employee payroll from the additional calculation of CSLL. This provision recognizes and rewards real economic activity in Brazil.
The main provisions of the New Tax System
The effective tax rate will be calculated based on the Global Anti-Base Erosion (GloBE) profit. If this rate falls below 15%, additional CSLL will be applied to reach the minimum level of taxation.
However, this system aims to prevent companies from artificially lowering their global tax burden. It discourages shifting of profit to low tax jurisdictions as a tax avoidance strategy.
Companies that fail to comply with reporting requirements face significant penalties. Fines can reach 0.2% of total revenue per month of delay, limited to 10% or R$10 million ($1.8 million).
Additionally, there is a 5% penalty for forgotten or incorrect information, with a minimum of R$20,000 ($3,600). The measure offers reduced penalties for companies that correct their information within specific timeframes.
In short, this tax reform represents a significant change in global corporate taxation. It aims to create a fairer system and ensure that multinational companies contribute their share to the public finances.
