The Brazilian Superior Court of Justice (STJ) caselaw, that was settled since 2012, has changed due to a recent case-law allowing Withholding Tax (IRRF) to be imposed over remittances related to services and technical assistance from Brazil to foreign countries.
The overruling happened at the last judgment session of 2020, in one of Court’s panels (there are two for tax matters). Now, there is a conflict between the two panels, which is problematic and brings uncertainty to taxpayers.
The ruling was held to allow the taxation because it considered remittances abroad to be “royalties”, that are taxed in the country of origin (therefore, Brazil), based on a specific rule existing in many Double Taxation Agreements (DTA). The case at issue regards the DTA between Brazil and Spain.
But the former understanding stands still in the other panel of the Court. The basis of the position is a general rule existing in many DTA, that considers remittances from foreign countries to pay services and technical assistance to be simply “income” and therefore taxed only in the receiving country.