Brazil implements a minimum tax rate of 15% for multinational companies.

On the evening of October 3, the Brazilian government issued an executive order imposing a 15% Social Contribution Tax on the profits of multinational companies (CSLL). This order aims to increase national fiscal revenue by taxing large multinational enterprises to eliminate the fiscal deficit while aligning with agreements reached by Brazil with approximately 140 economies.

The measure has been published in a special edition of the Federal Government Gazette and will officially take effect in January 2025, applying to multinational companies with consolidated revenues of at least €750 million (approximately R$4.5 billion) for at least two of the past four years. This move aims to align Brazil's tax legislation with the Global Anti-Base Erosion Rules and comply with the 15% minimum tax rate standard set by the Organization for Economic Cooperation and Development (OECD). It is expected that nearly 1,000 companies currently taxed at rates below 15% will be required to pay this tax starting in 2025. The Brazilian Ministry of Finance predicts that this measure will increase tax revenue by R$3.4 billion in 2026, with an expected growth to R$7.3 billion by 2027.

For Chinese companies operating in Brazil that meet the revenue threshold, this policy may result in a significant increase in tax burdens. Many Chinese enterprises have substantial operations in Brazil and may have benefited from previously lower tax rates; thus, the 15% minimum tax rate policy will directly impact their tax costs. Additionally, changes in Brazil's tax policy may require companies to reassess their investment strategies in the Brazilian market, considering compliance costs and potential impacts on profits.

Picture Source: Reuters/Amanda Perobelli