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Some of Europe's brightest legal minds look at the tax issues across Europe which could impact multinational businesses.

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New double taxation agreement between the UK and Brazil

In September 2022, Brazil and the UK announced a first round of negotiations for a double taxation agreement (DTA) following several years of discussions on technical and policy issues. It appears that the formal negotiations progressed well, given that a DTA was signed around two and a half months later on 29 November 2022. Once the DTA has entered into effect (and it is not yet clear when this will happen), the UK will have DTAs with seven out of the ten most populous States in Latin America and the Caribbean (see table at the end of this post).

Dividends and interest

The signature of the tax treaty should be welcome even though, in most cases, it reduces rather than eliminates withholding taxes. Pension schemes are a notable exception to this general position – dividends and interest paid by a company resident in one Contracting State to a pension scheme established in the other Contracting State are exempt from tax in the payor’s State. Otherwise, withholding taxes are limited to the following rates:

  • For dividends, the maximum rate is 15% for dividends paid by REIT-type vehicles out of income from immovable property (defined to include income from agriculture or forestry), and otherwise also 15%, unless the beneficial owner is a company which has held a direct interest of at least 10% in the capital of the payor for a year (in which case the maximum rate is 10%).
  • For interest, the maximum rate is 7% in the case of long-term infrastructure financing, 10% for other bank loans, bonds traded on a recognised stock exchange and sales on credit of machinery and equipment, and otherwise 15%.

One other point is worth noting in respect of Article 10 (Dividends). Where a resident of one Contracting State has a permanent establishment in the other Contracting State, Article 10(5) permits that other Contracting State to levy withholding tax (up to a maximum rate of 10%) in respect of the post-tax profits of that permanent establishment. The dividend article in neither the United Nations Model Double Taxation Convention 2021 nor the OECD’s Model Tax Convention on Income and on Capital 2017 includes such a provision.

Fees for technical services

Broadly speaking, where a resident of one Contracting State provides managerial, technical or consultancy services to a resident of (or permanent establishment in) the other Contracting State, Article 13 (Fees for Technical Services) would permit the recipient’s jurisdiction to impose tax on the gross fees for the first four years of the service provision (at a maximum rate of 8% for the first two years, 4% for the third and fourth year). Thereafter, the fees would be taxable only in the provider’s State.

Article 13 of the Brazil-UK DTA is based on Article 12A of the UN Model. Article 12A was added to the UN Model in 2017 to address the concern that, through the digital provision of cross-border services, the recipient country’s tax base could be eroded as the recipient’s tax deduction for the fees would not be matched by a tax charge on the service provider (because it would not need an establishment in the recipient’s jurisdiction on which a tax charge could bite).

Transfer pricing

Article 9 (Associated Enterprises) includes two noteworthy departures from the UN as well as the OECD Model which make it harder to obtain a corresponding adjustment (to decrease the taxable profits of an enterprise in one Contracting State) where an associated enterprise had additional taxable profits in the other Contracting State as a result of a primary adjustment in respect of a non-arm’s length transaction between the two.

Under Article 9(2), corresponding adjustments “shall be made only in accordance with the mutual agreement procedure in Article 27” – and note that Article 27 does not envisage that issues on which the competent authorities can’t reach agreement could be referred to arbitration. Where the competent authorities can reach agreement, Article 27(2) provides that such agreement “shall be implemented notwithstanding any time limits in the domestic law of the Contracting States”. Article 9(3) would seem to disapply this provision in relation to corresponding adjustments; it provides that a “Contracting State is not required to make a corresponding adjustment under paragraph 2 after the expiry of the time limits provided in its domestic law”.

Residence and entitlement to benefits

For persons other than individuals, the Brazil-UK DTA does not include a residence tie-breaker. As per Article 4(4), their residence would instead be determined through mutual agreement and, if the relevant authorities can’t agree, the person will not be entitled to any relief under the DTA except to the extent agreed between the authorities. Article 4(4) closely mirrors the wording of Article 4(1) of the Multilateral Instrument.

Generally, Article 27 (Entitlement to Benefits) limits the application of the DTA to “qualified persons”. Companies whose principal class of shares is regularly traded on a recognised stock exchange and their 50% subsidiaries would qualify. The definition of “recognised stock exchange” is, however, somewhat limited: B3 S.A (and others in Brazil), LSE, CBOE Europe Limited (and others in the UK) – plus such other stock exchanges as agreed between Brazil and the UK. It remains to be seen whether the list will be expanded in the future. Meanwhile, companies which are not “qualified persons” could still be entitled to benefit from the DTA, if they are at least 75% owned by equivalent beneficiaries.

UK’s DTAs with the ten most populous countries in Latin America and the Caribbean


Population (2021 World Bank data)

Tax treaty with the UK



Not yet in force



Took effect in 1994



Took effect in 2020



Took effect in 1998






Took effect in 1997



Took effect in 2005; modified by the MLI with effect from April 2022









Took effect in 1996


slaughterandmay, tax treaty, uk tax