Israel – Brazil Tax Treaty

Business Activity in Brazil

Brazil, Latin America’s largest economy, excels in agriculture, renewable energy, and innovation. The country has a stable economy, supported by strong regulations that attract foreign investments in numerous industries, especially renewable energy.

Over the past half-century, Brazil has transitioned from being an importer to one of the world’s largest producers and exporters of food. Additionally, the nation boasts one of the lowest emissions and most sustainable electricity systems globally, ranking in the top 10 for both metrics.

Brazil’s power sector, primarily regulated by the government, is supported by a substantial regulatory and legal framework, long-term Power Purchase Agreements, and a balanced, cooperative effort between the private and public sectors. Furthermore, Brazil’s startup ecosystem has flourished since 2010, with significant growth in startups, venture capital, corporate ventures and innovation hubs, establishing Brazil as an innovative leader in the region.

Bilateral Agreements Between Brazil and Israel

• Double Taxation Agreement
• Free Trade Agreement

Convention on the Prevention of Double Taxation

The agreement between the Governments of Israel and Brazil regarding the avoidance of double taxation was signed on December 11, 2002, and entered into force on December 31, 2005.

To read the agreement in English click here.

Residency for Tax Purposes in Brazil

Residence of an Individual

Generally, a foreign individual will be considered a resident for tax purposes in Brazil if they meet one of the following criteria:

• A foreign individual with a permanent visa or a temporary visa but they arrived in the country to work for a Brazilian company.
• Foreign individuals, that are in Brazil on a temporary visa (excluding work visas), and stay in the country for 183 days within a 12 month period, either consecutively or intermittently.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

According to Brazilian law, a company is tax resident if it was established in the country, the place of its effective management is in the counrty or its corporate headquartes are registred there.

To learn about how a company is considered a tax resident of Israel, click here.

The Tax System in Brazil

Brazil’s Tax Authority is called Receita Federal do Brasil.

Income taxation: 0%, 7.5%, 15%, 22.5%, 27.5%

Taxation of companies and branches: 15% – 34%

VAT: Brazil applies 3 layers of VAT: IPI (Federal) – Varies between 0% and 300%; PIS/COFINS (Federal) -3.65% or 9.25% and IMCS (State Level) – 17% and 20%/ ISS (Municipal Level) – Varies 2% and 5%

Capital gains tax: 15% to 22.5%

Withholding Tax

Inheritance Tax and Estate Tax in Brazil

Transfers of money, property, and assets between individuals due to inheritance or donation are subject to the Estate and Gift Tax (ITCMD). As Brazil is a federation composed of 26 states and a Federal District, the tax varies from state to state, with the maximum rate being 8%.

Relocation to Brazil

Brazil offers numerous tax advantages and investment opportunities, making it an attractive destination for individuals or companies considering migration to South America. It is part of both a large national market and international markets. Brazil is home to a strong economy and one of the world’s best infrastructures. In addition, the country is well-equipped to handle freight and accommodate staff according to the business plans of foreign or new employees.

Brazil has the world’s tenth-largest Jewish community, respectively is home to 92,000 Jewish people. The community actively participates in politics, sports, athletics, and business, and is well-integrated as well into Brazilian society.

Real Estate Taxation in Brazil

Transfer of Funds from Israel to Brazil

According to section 170(a) of the Israeli Income Tax Ordinance, all payments transferred to non-Israeli residents are subject to a 25% withholding tax. However, this tax can be reduced or even waived if certain conditions are met.

As mentioned above, the countries have signed a tax treaty, that allows taxpayers to submit 2513/2 form – Statement regarding a payment to a foreign resident that is exempt from withholding tax, to potentially transfer the payments without paying the withholding tax.

In addition to assisting with withholding tax matters, our firm also helps with other issues related to transferring funds abroad. This includes providing an accountant’s approval regarding the payment of taxes, reviewing additional actions required under the CRS standard, and more.

Moreover, banks often raise many difficulties and charge high fees for converting shekels into other currencies. Therefore, consulting with a specialist before transferring the funds is highly recommended, click here to contact us.

For more information on money transfers abroad, click here.

Types of Business Entities in Brazil

The most common types of Brazilian business entities include:

Limited Liability Company (LLC)

This type of business in Brazil can be established by two or more unit holders or stockholders, who may be individuals or companies, nationals or non-nationals. There is no minimum capital requirement for establishing the company. Shareholders are responsible for the company’s debts only in proportion to the amount they have invested. However, if the company fails to pay its debts, all partners will be responsible. Control is defined by the number of shares.

Joint-Stock Company (JSC)

A JSC, or Sociedade Anônima (S.A.) in Portugues-BR, is a business corporation that can be formed with public or private capital, with at least two shareholders, who can be individuals or legal entities, Brazilian or foreign. There is no minimum capital requirement, but shareholders must contribute 10% of the share price in cash. Shareholders’ voting power is based on the number of shares owned.

Eireli (Sole Proprietorship)

An Eireli is a Brazilian company named after its owner or its business purpose, with ‘Eireli’ added to the name. It is designed for sole ownership by a single individual, who can be either Brazilian or foreign. Once established, an individual can operate only one company of this type. The initial capital required is at least one hundred times Brazil’s highest minimum wage at the time of registration.

Incentive Laws in Brazil

Brazil offers incentives for economic activities and investments. Companies in Brazil can deduct foreign taxes from their income earned abroad. Approved investment projects receive exemptions from duties, excise taxes, and social contributions on imported equipment, along with faster depreciation and access to low-cost financing.

The Program for Investment Partnerships promotes public-private partnerships by funding infrastructure projects, supported by the Brazilian National Development Bank. Local governments provide tax advantages to boost regional growth, while federal regulations enable all Brazilian states to offer tax incentives, ensuring competitiveness for companies.

The Brazilian government has introduced a new bill for the Free Trade Zones Legal Framework, including significant legislative changes. Companies that are established in these zones will benefit from tax, exchange, and administrative advantages. The new law designates Free Trade Zones as areas for the free exchange of goods with foreign countries.

Additionally, companies operating within the Free Trade Zones are eligible for tax breaks on the purchase of machinery, raw materials, and inputs used in the production of export goods.

Double Tax Treaties in Brazil