On 3 October 2024, Interim Measure 1,262 was published, significantly altering the Brazilian tax system by instituting an Additional to the Social Contribution on Net Income (CSLL) to ensure a minimum effective tax rate of 15%. This adjustment aligns with the Global Anti-Base Erosion (GloBE) Rules devised by the Inclusive Framework on BEPS, coordinated by the OECD and G20, targeting global efforts against tax base erosion.
The additional CSLL is defined as a Qualified Domestic Minimum Top-up Tax (QDMTT), a supplementary tax imposed to secure a minimum taxation of 15% on income earned domestically.
Effective from 1 January 2025, this measure targets constituent entities of multinational groups with at least €750 million in consolidated annual revenues for two of the past four fiscal years.
Under this legislation, the additional CSLL applies to all legal entities except individuals and covers operations or arrangements required to prepare standalone financial statements.
It targets profits deemed “excess” by Brazilian accounting standards, excluding those grounded in substantive activities. The tax due is calculated as the difference between the 15% threshold and the actual tax rate, distributed proportionally among the entities based on excess profits. Payment is due by the seventh month following the fiscal year-end. Constituent entities are obliged to provide all relevant data for CSLL adjustment calculations and face penalties for non-compliance.
To elaborate on the methodologies, simplified rules, and transitional arrangements of this measure, Tax Directive 2,228 was issued concurrently.
Glossary:
Interim Measure – A temporary regulation issued by the Brazilian government that has immediate legal effect, pending further legislative action or confirmation.
CSLL (Social Contribution on Net Income) – A tax in Brazil on the net income of corporations, aimed at funding social programs.
GloBE Rules (Global Anti-Base Erosion Rules) – International regulations developed by the OECD and G20’s Inclusive Framework on BEPS to combat tax base erosion and profit shifting by ensuring that multinational enterprises pay a minimum level of tax.
OECD (Organisation for Economic Co-operation and Development) – An international organization that promotes policies to improve the economic and social well-being of people around the world.
G20 (Group of Twenty) – An international forum for governments and central bank governors from 19 countries and the European Union, which addresses issues related to global economic health.
Qualified Domestic Minimum Top-up Tax (QDMTT) – A specific type of tax under the GloBE Rules designed to ensure that multinational companies pay at least a minimum tax rate on income earned within a country’s borders.
Constituent Entities – Subsidiaries or components of multinational corporate groups that are included in the consolidated financial statements and subject to the regulations under discussion.
Excess Profits – Profits that exceed what is considered normal or expected under specific tax rules, often targeted by special tax provisions or adjustments.
Tax Directive 2,228 – Specific legislation or regulatory guidance issued to clarify, interpret, or implement tax-related measures, in this case, associated with the Interim Measure.
Substantive Activities – Business activities that involve significant physical presence, staff, and business operations, as opposed to those that might be considered artificial or primarily tax-driven.
Tax Base Erosion – The reduction of a country’s tax base due to tax avoidance strategies by corporations, such as shifting profits to low-tax jurisdictions.
