Brazil publishes Pillar Two regulation

Brazil is making significant strides toward implementing Pillar Two regulation.

In brief

• Brazil has approved Federal Law No. 15.079/2024, which introduces QDMTT over additional CSLL.
• The new law applies to multinational enterprises with over €750m revenue.
• The law is effective from 1 January 2025.
  

On Monday, 30 December, Brazil officially published Federal Law No. 15.079/2024, which implements the Pillar Two regulation, introducing the Qualified Domestic Minimum Top-up Tax (QDMTT) rule through an additional rate over the social contribution on net profit (Contribuição Social sobre o Lucro Líquido - CSLL).

With the new law, Brazilian entities that are part of multinational (MNE) groups with annual revenue of €750 million (BRL 4.78 billion) or more in the consolidated financial statements in at least two of the four fiscal years immediately preceding the tested fiscal year will be subject to the additional CSLL.

In its original wording, the bill reiterated the rules established by Provisory Measure No. 1.262/2024 issued in October 2024, which is expected to remain in effect until March 2025. However, the final version of the bill includes some key differences to the Provisional Measure 1.262/2024:

• The inclusion of a provision that, in the calculation of the adjusted covered taxes, temporary differences shall be treated by adjusting the current tax expense of the constituent entity in the fiscal year by the total amount of the adjustment for deferred taxes (Article 13).
• A directive for the executive power to submit a legislative proposal to the National Congress during the first semester of the 2025 fiscal year. This proposal aims to introduce the Income Inclusion Rule (IIR) in accordance with the OECD Pillar Two guidelines and a controlled foreign corporation (CFC) regime (Article 40).
• A provision stating that any update or amendment resulting in an increase in tax liability related to GloBE rules shall be applied to the fiscal year that begins in the year following the publication of the update or amendment and 90 days after the publication of the update or amendment (Article 3, §5º).

The new bill, now published as Federal Law No. 15.079/2024, has been signed by the President Luiz Inácio Lula da Silva and is now published in the Brazilian Official Gazette. The new rule came into force on 1 January 2025.

Our ITA Denmark team includes members with extensive experience in Brazilian taxation. While we always involve our local experts when we provide tax advice on Brazilian legislation, our team focuses on helping our European clients navigate Brazil’s sometimes complex tax system.