The Treasury Department has been involved in informal negotiations with the Brazilian government on a tax treaty between the U.S. and Brazil. Treasury has been getting a lot of pressure from the U.S. business community to negotiate with the Brazilians. Unfortunately, the Brazilians want to negotiate the treaty almost entirely on their own terms. The Brazilians have included many of the same provisions in their tax treaties since the 1970’s. The NFTC has sent the attached letter to Treasury clarifying our position on a tax treaty with Brazil. The NFTC strongly supports a tax treaty that follows recent tax treaty precedents and lowers the withholding rates on interest, dividends and royalties to zero, and provides for the arms length standard for transfer pricing, a reasonable mutual agreement procedure, and a permanent establishment provision that reflects that traditional position of the United States. We will not support a treaty that codifies the current high Brazilian tax rates and would be a step backward in the overall tax treaty network. The NFTC will continue to work to strengthen our tax treaty network, particularly in those countries of highest priority to NFTC members.
We have sent the letter to both Treasury Secretary Paulson and Commerce Secretary Gutierrez. Michael Mundaca, John Harrington and Henry Louie have all received copies of this letter.
To view the letter follow the link.
