The UK and Brazil Double Tax Agreement: What You Need to Know
The UK and Brazil Double Tax Agreement (DTA) is an agreement between the governments of the United Kingdom and Brazil that aims to avoid double taxation of income and capital gains. This agreement was signed in London on November 27, 2015, and came into effect from January 1, 2017.
The DTA is aimed at reducing the tax burden faced by individuals and businesses operating in both countries. By eliminating double taxation, it helps to promote trade and investment, and also prevents tax evasion. In this article, we will take a closer look at the key features of the UK and Brazil DTA.
Taxation of Income
Under the DTA, the taxation of income is based on residency. If an individual or company is resident in one country but receives income from the other country, the income will be taxed in the country of residence. However, if the income is derived from a business or profession carried on in the other country, it will be taxed in that country.
Dividends, Interest, and Royalties
The DTA also provides for the elimination of double taxation on dividends, interest, and royalties. Dividends paid by a company resident in one country to a resident of the other country will be subject to a maximum withholding tax of 15%. Similarly, the maximum withholding tax on interest and royalties is 10%.
Capital Gains Tax
Capital gains arising from the sale of immovable property (such as real estate) are taxed in the country where the property is located. However, gains arising from the sale of other assets (such as shares) are taxed in the country of residence of the seller.
Taxation of Pensions
If you are resident in one country and receive a pension from the other country, the pension will be taxed in the country of residence. However, if you are a resident of one country and contribute to a pension scheme in the other country, the contributions may be eligible for tax relief in both countries.
Article 26 – Exchange of Information
One of the key features of the UK and Brazil DTA is Article 26, which provides for the exchange of information between the two countries. This exchange covers all types of income and taxes and is aimed at preventing tax evasion.
The UK and Brazil DTA is a comprehensive agreement that aims to promote trade and investment between the two countries. By eliminating double taxation and providing for the exchange of information, it helps to create a more transparent and fair tax environment. Whether you are an individual or a business operating in both countries, understanding the key features of the DTA can help you to optimize your tax planning and avoid any potential pitfalls.