The Treasury stated that 8,704 companies are part of the scope of multinationals that will be subject to taxation. (Image: Marcello Casal Jr/Agência Brasil)
The government published a provisional measure, in an extra edition of the Official Gazette of the Union on Thursday, which establishes a minimum taxation of 15% on the profits of multinationals that operate in the country, an initiative that can reinforce public coffers amid the economic team's search for fiscal stabilization.
The measure will come into force in January 2025, but the impact on revenue will only occur from the following year onwards, with estimated gains of 3.4 billion reais in 2026, 7.3 billion reais in 2027 and 7.7 billion reais in 2028, subsequently stabilizing at around 8 billion reais per year, in calculations considered conservative by the economic team.
According to the Ministry of Financealmost a thousand multinational companies operating in Brazil pay less than 15% of their profits, and may be subject to minimum taxation.
The measure establishes a mechanism for charging additional Social Contribution on Net Profit (CSLL) so that the minimum effective taxation is achieved if the amount due in a tax year falls below this percentage.
The charge will be applied to multinationals that have annual revenues above 750 million euros in at least two of the four fiscal years immediately preceding the one analyzed.
The government stated in the MP that the initiative adapts Brazilian legislation to the Global Rules Against Tax Base Erosion (GloBE Rules) drawn up by the Organization for Economic Cooperation and Development (OECD) and the G20.
According to the text, the Federal Revenue will regulate the charge, including currency conversions. The rules must be periodically updated so that they are in line with the reference documents approved by the OECD.
The MP comes into force immediately, although it depends on subsequent approval by the National Congress to remain valid, but the text defines that the rules will be valid from January 2025.
Companies that will be impacted by the new taxation
The Treasury stated that 8,704 companies are part of the scope of multinationals that will be subject to the tax floor as they have annual revenue exceeding 750 million euros.
Of this group, the ministry pointed out that 957 companies belong to groups with low taxation, with effective payments of less than 15%, considering data from 2022.
The Federal Revenue Secretary, Robinson Barreirinhas, also pointed out that 20 Brazilian groups are part of this group that currently pays less taxes than this minimum level.
The government argues that Brazil is a low-tax jurisdiction for some multinational groups due to the granting of tax incentives, although most companies pay more than this level.
According to Barreirinhas, the nominal taxation of companies in Brazil is generally around 34%, but the effective rate ends up being lower due to the granting of tax benefits such as the reduction of taxes after the distribution of Interest on Own Capital (JCP) by companies to shareholders.
He argued that Brazil's objective is to align itself with international rules that seek to curb the flight of resources to countries with lower taxes.
The OECD advocates that large multinationals pay a minimum tax of 15% on their profits in all jurisdictions where they operate, thus cutting incentives for them to remit profits to countries where they enjoy tax advantages.
“This is a defensive measure for the Brazilian treasury, if we do not charge this difference in taxation, some other country will do so”, stated the secretary.
Barreirinhas highlighted that the MP foresees reductions in charges for companies that make investments in Brazil or have a large employee payroll.
Furthermore, the secretary stated that tax incentives that fall under OECD rules and the benefits of the Amazon Development Superintendency (Sudam) and the Northeast Development Superintendency (Sudene) will not be harmed by the measure.
When presenting the 2025 Budget at the end of August, the Ministry of Finance stated that minimum taxation on multinationals would be proposed if revenue frustrations occurred. The ministry's minister, Fernando Haddad, has also advocated that Brazil anticipate international agreements and establish mechanisms for taxing multinationals and so-called “big techs”.
The Secretary of International Affairs for Finance, Tatiana Rosito, had already informed Reuters in November 2023 that Brazil was preparing to adopt minimum taxation.
In another fundraising initiative proposed on Thursday, the Ministry of Finance reported that the government published a provisional measure that changes the deadline for banks to deduct losses arising from default in the calculation basis of Corporate Income Tax (IRPJ) and CSLL, with an estimated gain of 16 billion reais in 2025.