Spanish “ETVEs” suspended from Brazilian privileged tax regimes’ blacklist

Following the same procedure adopted for Switzerland and the Netherlands, the Brazilian IRS, via the Executive Declaratory Act 22, issued on November 30, 2010, has suspended from the Brazilian privileged tax regimes’ blacklist⁴ the Spanish companies incorporated as “Entidades de Valores Extranjeros” or “ETVEs”.

As from that date (November 30, 2010), the effects arising from tax deductibility, thin cap and transfer pricing rules applicable to companies subject to privileged tax regimes are suspended in relation to the Spanish ETVEs.

Like the Dutch and Swiss companies, investments from Spain are abundant in Brazil and there are many Spanish multinational corporations here installed. The backlist would adversely affect many companies, transactions and businesses already engaged in Brazil. The inclusion of Switzerland, Dutch HoldCos and Spanish ETVEs in the tax havens and privileged tax regimes’ blacklist had been not very well accepted by the market. For this reason, the local tax authorities decided to suspend the effects of the blacklist in those cases, aiming to consider all the relevant aspects involved.

By Fábio Dantas, M&A Tax Senior Manager

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4 The Blacklist was established by the Normative Instruction 1,037, issued on July 4, 2010.