quarta-feira, 9 de janeiro de 2013

Gerdau case: exemption of taxation over foreign subsidiaries

 Since 2001, all Brazilian matrix companies must pay income tax over the profits of its foreign subsidiaries yearly, even if such profits are not properly distributed as dividends. 

That has led the Brazilian Revenue Service to hunt down several Brazilian companies that maintained subsidiaries abroad, and tax them. 

However, the situation remained unclear in many instances. For example: what would happen when the country where the subsidiary was located maintained a non double taxation agreement with Brazil?

Or, what if there were many layers of shell companies and subsidiaries?

Today, there are literally billions of dollars at stake, as the Brazilian Supreme Court analyzes the constitutionality of such taxation. More on that here.

However, a very good piece of news came up this week: an administrative court has ruled in favor of Gerdau, in a case related to Gerdau's subsidiary in Spain (which maintains a NDT with Brazil). 

By the way, Gerdau is a leading producer of long steel in the Americas and one of the largest suppliers of special steel in the world.

I'm hoping this decision will tip the scale in favor of the Brazilian companies. After all, it has discussed many of the arguments that will be judged by the Supreme Court in the future. 

A detailed description of the case, in Portuguese, may be found here. 

3 comentários:

  1. The Lion vs. Gerdau

    Nicely done Adler.

    A case super importante. Brazil is going to great lengths to find money and will resort to underhanded tactics such as fighting out in court even though they know they are wrong. It is a real shame that Brazilian companies as well as Brazilian citizens are paying double & triple taxes. Let´s see how the political game will play out in the STF.
    Obs.: Now let´s talk about why we pay import & export taxes with the cost of freight figured into the calculations by the Receita Federal???

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