Bertrand de Solere Blog
Tax domicile in Brazil and the Double Taxation Agreement signed with France.
Brazil has adopted, since 1995 (Law 9.249), the principle of universality of income. This means that all income of people residing in Brazil for tax purposes, including those received abroad, is subject to income tax.
The notion of tax domicile is therefore important in order to avoid double taxation of income or in order to be able to carry out a good tax strategy.
According to Brazilian legislation, tax residence is determined in two possible ways: (i) either by the residence permit (the visa accompanied by the CRNM card for foreigners); (ii) or by the duration of presence in the territory, greater than 183 (one hundred and eighty-three) days, consecutive or not, over a period of 12 (twelve) months from the date of arrival in Brazil.
It is also possible that a person is also considered a tax resident in France, according to French legal provisions.
In order to avoid this type of situation, France and Brazil concluded, in 1971, a Convention for the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income (entered into force in Brazil by Decree No. 70.506/72)
In the event that a person considers himself resident in both France and Brazil, paragraph 2 of Article 4 of the France Brazil Tax Treaty settles the dilemma with 4 (four) alternatives:
a) This person is considered to be a resident of the Contracting State in which he has a permanent home. When he has a permanent home in each of the Contracting States, he is considered to be a resident of the Contracting State with which his personal and economic ties are the closest (centre of vital interests);
b) If the Contracting State in which that person has the center of his vital interests cannot be determined, or if he does not have a permanent home in any of the Contracting States, he shall be deemed to be a resident of Contracting State where he usually stays;
c) If this person is habitually resident in each of the Contracting States or if he is not habitually resident in any of them, he shall be deemed to be a resident of the Contracting State of which he is a national;
d) If this person possesses the nationality of each of the Contracting States or if he does not possess the nationality of either of them, the competent authorities of the Contracting States shall decide the question by mutual agreement.
Thus, when a person is considered to be resident in each of the two States, it is mainly the notion of “centre of vital interests” which is decisive in determining the tax domicile.
The center of vital interests is defined following the analysis of a plurality of variables, such as home, personal ties, economic ties and nationality.
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