Brazil: Cost-reimbursement arrangements | KPMG | GLOBAL

Brazil: Revised position of tax authorities, cost-reimbursement arrangements

Brazil: Cost-reimbursement arrangements

The Brazilian tax authorities have revised their previous position concerning cost-reimbursement arrangements, and this change may possibly jeopardize some of the tax savings previously realized in cross-border transactions involving these arrangements.


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In a 2012 private ruling (Ruling 08/2012), the Brazilian tax authorities concluded that Brazilian taxpayers could implement cross-border cost-reimbursement arrangements that avoided Brazilian federal taxes (i.e., withholding tax, corporate income tax, CIDE, PIS-COFINS) but that also complied with transfer pricing and tax deductibility rules.

  • CIDE (Contribuição de Intervenção no Domínio Econômico) is imposed on cross-border payments of royalties, in general, and certain services.
  • PIS-COFINS are two social contributions in Brazil—PIS (Programa de Integração Social) and COFINS (Contribuição para o Financiamento da Seguridade Social).

Revised position

In late 2015, a private ruling (Ruling 43/2015) was issued, and in that ruling, it appears that the tax authorities revised their position in Ruling 08/2012. The new ruling may affect the opportunities for taxpayers to obtain withholding and CIDE exemptions, but it does not affect PIS-COFINS savings and corporate income tax deductibility savings.

KPMG observation

In light of Ruling 43/2015, a taxpayer strategy for implementing a cost-reimbursement arrangement that involves obtaining private rulings, would require a “breakdown” of the ruling requests (one for withholding tax, one for CIDE, one for PIS-COFINS, and one for the corporate income tax deduction). Even with reduced chances of obtaining favorable rulings on withholding tax and CIDE, tax professionals understand that requesting a ruling on all of these issues still may be an effective strategy, given that the ruling process can be the first step in mounting a judicial challenge to any adverse administrative adjudication of these issues.


For more information, contact a tax professional with KPMG’s Latin America Markets Tax practice:

Devon M. Bodoh | +1 (202) 533-5681 |

Alfonso A-Pallete | +1 (305) 913 2789 |

Murilo Mello | +1 (305) 913 2781 |

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