British Parliament approves non-double taxation agreement with Brazil

The vote in the British parliament took place on Wednesday (19), but was only announced on Thursday (20) by the British Embassy in Brazil. According to the embassy, ​​the agreement strengthens trade between the two countries, a measure defended by President Luiz Inácio Lula da Silva on a visit to London in May.

“In addition to representing a response to requests from the business community of both countries, the measure is in line with the ambitions of President Lula and Prime Minister Rishi Sunak to create new opportunities for trade and investment between the two countries. This desire to strengthen bilateral trade was made public during the official visit of the Brazilian president to London, in May this year”, highlighted the embassy in a note.

The agreement prevents transactions between Brazil and the United Kingdom for the payment of dividends, royalties, services, interest and other types of payment from being subject to tax on income or profit twice (once in each country). Taxation will occur only once, providing more legal certainty and helping to fight tax evasion.

earnings

According to the British Embassy, ​​the agreement will allow companies from both countries to import technologies and services not available in the domestic market to increase production and competitiveness. Many resources currently used to pay taxes twice, emphasizes the embassy, ​​can be reallocated for investments, including research, innovation and development.

Aligned with the guidelines of the Organization for Economic Cooperation and Development (OECD) to avoid erosion of the tax base and the transfer of profits to tax havens, the non-double taxation agreement also helps to combat tax evasion and avoidance (when companies take advantage of loopholes in the legislation to avoid paying taxes). This is because there will be more exchange of information in tax collection, improving efficiency and rationality in tax collection.

According to the Federal Revenue, with the coexistence of several legal and tax systems brought about by globalization, trade and investment flows were taxed twice (once in each country) or not taxed at all (double non-taxation). The agreement seeks to correct these distortions.

Historic

Since 2017, Brazil and the United Kingdom have been discussing the non-double taxation agreement. After years of exploratory dialogues, negotiations between the Inland Revenue and the equivalent body in the United Kingdom began in 2022 and were concluded after five months of discussion. The agreement was signed in November last year.

According to the Central Bank, Brazilian investments in the United Kingdom totaled US$ 8.03 billion, and British investments in Brazil totaled US$ 28.91 billion in 2021. In turn, the trade flow (sum of exports and imports) reached US$ 6.5 billion last year, up 14.9% compared to 2021, according to the Ministry of Development, Industry, Commerce and Services.