Originally published in the December 7 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil and Germany on November 13 executed an agreement that exempts the airline companies of each country that operate in the other country from gross revenue taxes charged by the other country.
The agreement provides for P.I.S. (Program for Social Integration) and COFINS (Contribution for the Financing of Social Security) exemptions for German airlines, and cancels their past P.I.S. and COFINS1 liabilities.
Germany will not levy social contributions similar to P.I.S. and COFINS on Brazilian airlines operating in Germany. However, the tax exemption under the November 13 agreement does not apply to the German social security tax.
The agreement is based on article 4 of Brazil’s Law 10,560/2002, which provided for the cancellation of Brazilian airlines’ P.I.S. and COFINS liabilities before February 1, 1999. After that date, Brazilian airlines became exempt from P.I.S. and COFINS on income from the international transportation of cargo and passengers. Paragraph 1 of article 4 allowed the executive branch to extend that waiver and exemption to foreign airlines if reciprocal treatment was adopted in the foreign country. The resulting agreement with Germany is similar to agreements executed in 2002 with the United Kingdom and the Netherlands.
Brazil states in the agreement that German airlines’ P.I.S. and COFINS tax liabilities due before February 1, 1999, are declared null for all legal purposes.
- FOOTNOTE
1 The cancellation also applies to tax liabilities under FINSOCIAL (the Government Social Investment Fund charge), the predecessor to COFINS.
- END OF FOOTNOTE
David Roberto R. Soares da Silva