🇧🇷 Brazil — 🇺🇸 United States

Tax Treaty / Double Tax Avoidance Agreement detail

Brazil and the United States have no comprehensive income tax treaty — an unusual situation given the scale of bilateral trade and investment between the world's two largest economies in the Western Hemisphere. Repeated attempts to negotiate a treaty date back to the 1960s, but talks have consistently stalled. The most recent substantive breakdown occurred in the 1990s when US negotiators halted discussions primarily over Brazil's insistence on preserving Article 23-style source-state taxation rights, which conflicted with the US model treaty's residence-based approach. In the absence of a treaty, bilateral business taxation is governed entirely by domestic law in each jurisdiction. The United States imposes a 30% withholding tax (reduced to 15% for portfolio dividends in some circumstances under domestic law) on US-source payments to Brazilian residents, with no treaty reduction available. Brazil applies withholding rates of 15% to 25% on remittances for interest, royalties, services, and technical assistance paid to US residents or entities, depending on the nature of the payment and whether the recipient is in a listed low-tax jurisdiction. The principal instrument governing information exchange and tax compliance between the two countries is the FATCA Intergovernmental Agreement — a Model 1 IGA signed on 23 September 2014 and brought into force in 2015. Brazil reports US account holders' financial data to its own tax authority (Receita Federal), which then shares it with the IRS. Separately, Brazil participates in the OECD Common Reporting Standard (CRS), while the US does not — relying on FATCA bilaterals instead. A significant development was the US–Brazil Totalization Agreement on social security, signed 30 June 2015 and entered into force 1 October 2018. This prevents double social security taxation for workers posted between the two countries and allows contribution periods to be combined for benefit eligibility purposes. To mitigate double taxation in the absence of an income treaty, the US allows a unilateral foreign tax credit for Brazilian taxes paid under IRC Section 901. Brazil offers credit under domestic rules for foreign taxes, though application to US-source income can be limited. The divergence in transfer pricing regimes has historically been a major friction point; Brazil adopted OECD-aligned transfer pricing rules through Law 14.596/2023, effective 2024, partially closing this gap. Brazil's proposed reintroduction of a dividend withholding tax (discussed in the 2025 fiscal reform package) could add further complexity for US investors holding Brazilian equity. The absence of permanent establishment definitions in any bilateral instrument remains relevant for US service providers operating in Brazil.