Brazil Tax System: Grey and Black List

Brazil’s tax authorities have clarified the definition of substantial economic activities, which it uses to determine if a jurisdiction should be deemed to have a privileged tax regime. The clarification came in the normative ruling (NR 1,658/16) published September 2016.


Countries deemed to have a privileged tax regime are included on Brazil’s grey list of jurisdictions. The ruling also amends the list of black and grey jurisdictions for Brazilian tax purposes.  A blacklisted jurisdiction is one that does not tax income or taxes at rate lower than 17%, or does not allow access to information on a corporate structure or on the identity of the beneficial owner of income.

The new rules apply retroactively from 1 August 2016 and are important for companies doing business in Brazil as they may face negative tax consequences. Companies can face an immediate application of Brazil’s transfer pricing rules and a reduced debt-to-equity ratio under the thin capitalization rules. Also, companies can see an increase in the normal 15% withholding tax rate to 25% where remittances are made to a tax haven jurisdiction. 

Substantial Economic Activities

According to NR 1,658/16, a holding company has substantial economic activity when it has sufficient operational capacity in its country of origin. This includes employment of sufficient and qualified employees by the holding company itself, and an adequate physical premise for the management and execution of activities in order to derive income from assets it possesses; or management of equity investments with the purpose of obtaining income arising from the distribution of income and capital gains.

The proposed language is in line with recommendations under action 5 of the OECD Base Erosion and Profit Shifting (BEPS) project.  Although Brazil is not a member of the OECD, it participates as an associate.

Curacao, Ireland and St. Martin are included on the black list of tax haven jurisdictions and Netherlands Antilles and St. Kitts & Nevis have been removed. The black list now lists 65 countries.

Austrian entities incorporated as holding companies are included on the grey list. As such, all Austrian holding companies are affected.

The information shared in the article provides general information only and not a professional or legal advice. If you would like more information on doing business in Brazil or internationally, please email is at or call +1-408-913-9130 to speak to our experts or contact us below.