Nearly a thousand multinational groups in Brazil may be impacted starting this year by the additional 15% CSLL (Social Contribution on Net Profits) established under Law 15,079, derived from Provisional Measure 1262. This aims to function as a global minimum taxation mechanism aligned with the OECD’s GloBE rules.
Essentially, the GloBE rules seek to combat corporate taxation below 15% by targeting profit allocation to low-tax jurisdictions with no substantive physical presence. This is achieved through:
(i) minimum taxation within the low-tax jurisdiction itself (Qualified Domestic Minimum Top-up Tax – QDMTT); and if not,
(ii) minimum taxation in the jurisdiction of the parent entity (Income Inclusion Rule – IIR); or
(iii) taxation in any other jurisdiction where the group operates (Undertaxed Profit Rule – UTPR).
In the law published on December 30, Brazil implemented only the QDMTT, justifying it as a defensive measure: if minimum taxation is not applied here, another country could capture the local profits through IIR or UTPR rules.
Thus, the measure’s purpose is not to capture profits allocated to jurisdictions practicing harmful tax competition but to ensure that at least 15% is paid on the income of multinational group entities located in Brazil.
But isn’t corporate taxation in brazil 34%? since when did we become a tax haven?
In reality, the intent is to nullify the positive effects of legitimate deductions and incentives provided under our legislation, subjecting multinational groups to a peculiar regime of income taxation. Pragmatically, this is the purpose of the “Brazilian-style” GloBE rules.
In addition to corporate income tax (IRPJ) on actual profits, companies within groups earning over €750 million annually will be subject to taxation on “GloBE net profit,” calculated using additions and exclusions distinct from those applied to other legal entities.
This is why the new law did not amend the IRPJ legislation and instead used CSLL as a workaround: income tax could never accommodate discrimination based on the taxpayer’s integration into a multinational group with a specific revenue threshold.
The Federal Revenue Service openly acknowledged this artifice, claiming during the issuance of MP 1262 that Article 195 of the Constitution allows CSLL differentiation based on economic activity and company “size.”
However, the discrimination arises not only from a legal entity belonging to a multinational group but also from having its local income taxed at less than 15%. Paying more or less IRPJ is certainly not a differentiation factor authorized by Article 195.
Additionally, the CSLL surcharge does not refer to the legal entity individually but to the group of companies located in Brazil. It even allows any one of them to opt for the condition of being the taxpaying entity.
the punitive nature of the measure is also striking: CSLL is applied as a penalty to those achieving lower corporate taxation. It punishes lawful behavior, treating a tax as a sanction, which is prohibited by the National Tax Code.
Finally, the measure disrespects the federal pact. Not only is CSLL revenue not shared with other federal units, but it could also affect companies benefiting from legitimate state or municipal incentives that form part of the “GloBE net profit.