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Brazil: Implementation of Pillar Two rules establishes qualified domestic minimum top-up tax

Officially aligns Brazil with countries that have adopted the OECD's global anti-base erosion (GloBE) rules

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October 7, 2024

Provisional Measure (PM) 1,262 was issued on October 3, 2024, introducing an additional social contribution on profits to establish a qualified domestic minimum top-up tax (QDMTT) in Brazil and officially aligning Brazil with countries that have adopted the OECD's global anti-base erosion (GloBE) rules.

Normative Instruction RFB 2,228 was also released, providing key details on how the new rules will apply.

  • QDMTT implementation: The QDMTT will enforce a minimum tax rate of 15% on large multinational enterprises (MNEs), aligning Brazil with OECD's Pillar Two framework.
  • OECD commentaries and guidance: Explicitly referencing OECD commentaries and guidance as the interpretative framework signifies a major shift in Brazilian tax law, emphasizing the importance of understanding and integrating these global standards into domestic practices.
  • Tax incentives adjustments: Adjustments to the SUDENE and SUDAM tax incentives have been authorized to ensure compatibility with Pillar Two.
  • Mergers and acquisitions (M&A) implications: The new rules introduce significant changes in the tax treatment of goodwill and fair value, impacting multinational groups involved in M&A in Brazil.
  • Transitional safe harbors: The incorporation of transitional safe harbors until 2026 offers tools to manage and mitigate the potential impacts of these changes, providing a buffer period for businesses to adapt.

Read an October 2024 report prepared by the KPMG member firm in Brazil

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