On 2 March 2026, Brazil published Decree No. 12,865, formally enacting the Agreement between the Federative Republic of Brazil and the Republic of Poland for the Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance, as well as its Protocol, originally signed on 20 September 2022. The agreement entered into force for Brazil on 5 November 2025.1
WHY THIS MATTERS
This development establishes a wide-ranging framework governing the taxation of income in cross‑border situations between Brazil and Poland, with relevance for globally mobile employees, multinational employers, and cross‑border investors. The agreement is intended to allocate taxing rights between the two countries, mitigate double taxation, and prevent tax evasion and avoidance, including treaty shopping.
Key Highlights
- Applies to residents of either or both states and covers Brazilian federal income tax and social contribution on net profit, as well as Polish personal and corporate income taxes. It also applies to substantially similar taxes introduced after signing.
- Provides detailed criteria for determining individual and corporate tax residency, including dual-residence tiebreakers based on permanent home, center of vital interests, habitual abode, and nationality.
- Sets out broad PE rules, including construction sites (threshold: 12 months), dependent agents, insurance, and anti-fragmentation. Defines “closely related enterprises” for PE assessment.
- Specifies allocation of taxing rights on employment income, pensions, directors’ fees, technical service fees, dividends, interest, royalties, capital gains, and other types of income, with withholding tax limits (e.g., 10 – 15 percent for dividends, interest, and royalties, 10 percent for technical services).
- Both countries agree to provide relief from double taxation through the granting of foreign tax credits, subject to domestic law limitations.
- The protocol introduces limitation‑on‑benefits provisions, a principal purpose test, and rules addressing treaty shopping and the interaction with controlled foreign company (CFC) legislation.
- Facilitates information exchange for tax compliance and establishes procedures for resolving treaty-related disputes.
- The agreement applies to income paid, credited, or derived on or after 1 January of the year following entry into force. Accordingly, it applies from 1 January 2026 for Brazil and for tax years or fiscal periods commencing on or after 1 January 2026 for Poland.
KPMG INSIGHTS
In light of the changes, organizations might wish to consider the following:
- Review cross-border employee assignments and remuneration structures to improve withholding and avoid double taxation under the new rules.
- Assess existing and planned intercompany transactions for PE exposure and LOB/PPT compliance.
- Update payroll, HR, and tax compliance procedures for the new withholding rates and reporting obligations.
- Revisit corporate structures and financing arrangements that may be affected by anti-abuse and CFC provisions.
- Inform globally mobile employees and business travelers about changes to their tax obligations and available treaty relief.
If assignees and/or their programme managers have any questions or concerns about the scope of the update, its application and potential impacts, and appropriate next steps, they should consult with their qualified professional or a member of the GMS team with KPMG in Brazil (see the Contacts section).
ENDNOTE:
1 Presidência da República, Casa Civil, Secretaria Especial para Assuntos Jurídicos (in Portuguese), “Decreto Nº 12.865, de 2 de março de 2026,” published on 3 March 2026.
Contacts
Disclaimer
The information contained in this newsletter was submitted by the KPMG International member firm in Brazil.
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