Luxembourg is out of Brazil's so-called "Grey List" for tax purposes

As per official declaration issued on March 25^th., 2011 effective at its publication on March 28^th., 2011, the Brazilian Tax Authorities definitively excluded Luxembourg from the List of Favorable and Preferential Tax regimes (by acknowledging that the Holding Companies of the Luxembourg law of 1929 -“H29”, that ultimately motivated the inclusion, were definitively extinguished as per relevant Luxembourg legislation, duly implemented).

 

In June 2010, Luxembourg holding companies were included in Brazil’s list of preferential tax regimes under article 2 of Normative Instruction RFB Nº 1.037, of June 4^th, 2010 (IN 1037), together with The Netherlands (holding companies with little or no real activities), Spain (E.T.V.E.s), USA (tax-transparent LLCs held by non-resident members), Denmark (holding companies with little or no real activities), Hungary (offshore KFTs), Uruguay (“SAFIS”), Iceland (International Trading Companies) and Malta (International Trading Company and International Holding Company).

Article 2 of IN 1037, as above defined, became known as the Brazil’s “Grey List” and the Brazilian companies doing business with companies in countries or dependencies encompassed thereto became, in principle, subject to restrictive “thin capitalization” and “transfer pricing” rules. In addition they became subject to “Reduced” or “No deductibility” of interest and other expenses in remittances of capital gains or payment of services rendered by them (as set forth in MP No. 472/09, of 16 December 2009).

While Denmark and the Netherlands reacted and subsequently obtained certain “Rectifications”, Luxembourg is the first to be granted the full ELIMINATION from Brazil’s “Grey List”.

 

Having its qualifying status for Brazil tax purposes confirmed, Luxembourg reaffirms its comparative advantages to other jurisdictions and privileged position to serve Brazilian clients that invest or trade abroad (Europe or other regions) as well as individuals, international companies and financial institutions that want to invest and expand their businesses to Brazil.

Disposing of a modern, pragmatic and flexible legal and regulatory framework, Luxembourg offers an extensive tax-treaty network (DTT) and bilateral investment treaties (BIS). Moreover, the advantages of the Participation Exemption regime, Intellectual Property, Low Vat and advance ruling and APA policy, make Luxembourg’s wide range of investment vehicles and special tax regimes (Soparfi, SIF, SICAR) the set of right choices to meet the needs of those structuring investments in and from Brazil.