Financial Services Ireland

Irish Tax Alert – Irish funds to suffer increased Brazilian withholding tax

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Irish Tax Alert – Irish funds to suffer increased Brazilian withholding tax

Irish funds invested in Brazil will suffer increased rates of Brazilian withholding tax on payments of income and gains made after 1 October 2016.

On September 14, 2016, the Brazilian Tax Authorities updated their black list for tax purposes via Normative Instruction 1658/16 (NI 1658/16) adding Ireland to this list.  Brazil imposes higher withholding tax rates on income and gains paid to black list jurisdictions.

The changes are effective 1 October 2016.

Under the updated rules Irish funds will be subject to higher withholding tax rates from payment of income and gains made after 1 October 2016.

From a withholding tax perspective, the impact or Irish funds investing in Brazil of Ireland being on the black list is as follows:

Pre black list withholding tax rates (Pre 1 October 2016) Post black list withholding tax rates (Post 1 October 2016)
Interest income (generally) 15% 15 – 22.5%
Interest income on debt 15% 15 – 22.5%
Interest income on publically traded fixed income debt 15% 15 – 22.5%
Interest income on privately traded fixed income debt 15% 15 – 22.5%
Interest income on Government Bonds 0% 15 – 22.5%
Income/ capital gains from public equity 0% 15%*
Income/ capital gains from private equity 15% 25%*
ADR’s 0% 0%

*the lower (pre black list rate) may apply to accrued interest up to 1 October 2016)

What should you do now?

Irish funds and investment managers will need to consider the impact of the rules on their activity:

  • Are your investments affected by the new rules?
  • Will these new rules impact on your fund’s NAV and will any adjustment may be required to the NAV?
  • For funds which prepare their financial statements under US GAAP or for SEC affected funds which prepare their financial statements under IFRS but with a US GAAP reconciliation, will an ASC 740 (FIN 48) provision be required in advance of year end?

As this area is continuing to develop, we will keep you informed should there be any updates to the current position.

In the meantime, please do not hesitate to reach out to us to discuss the potential impact on your business and investor base.

Thought Leaders


Donal O’Sullivan

Tax Leader

Sinéad Colreavy

Director, Business Tax Advisory




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