Brazil publishes new agreements with Chile and Poland to eliminate double taxation and combat tax evasion

On March 3, 2026, the Brazilian federal government enacted two new decrees aimed at eliminating double taxation on income arising from transactions involving Chile and Poland. The measures, which are already in force, seek to balance the tax burden for residents of these countries, ensuring that income is not taxed twice nor left untaxed.

In addition, both agreements strengthen enforcement mechanisms to combat tax evasion and the improper use of tax treaties to artificially reduce taxation (treaty shopping), including provisions for the exchange of information between tax authorities.

1. Brazil-Chile protocol amending the convention for the avoidance of double taxation and the prevention of fiscal evasion – Decree No. 12,863/2026

Decree No. 12,863/2026 amended the convention signed on April 3, 2021, in Santiago, between Brazil and Chile. This new instrument aligns with the international standards established by the Organization for Economic Co-operation and Development (“OECD”) to combat tax evasion, particularly those developed under the Base Erosion and Profit Shifting (“BEPS”) project.

The main pillars of the amendments include:

(i) Permanent Establishment rules with anti-fragmentation measures, designed to prevent the artificial splitting of business activities among multiple jurisdictions for tax avoidance purposes – Article 5;

(ii) amendments to the maximum withholding tax rates applicable to cross-border payments between the two countries – Article 6:

• 15% for the use of trademarks (commercial or industrial);
• 10% for all other types of royalties (technology, copyrights, etc.).

(iii) introduction of anti-abuse provisions concerning treaty benefits, including the Principal Purpose Test (PPT), under which treaty benefits may be denied where obtaining a tax advantage is one of the principal purposes of the arrangement, and the Limitation on Benefits (LOB) rule, which establishes categories of “qualified persons” entitled to access treaty benefits – Article 10.

Furthermore, Brazil preserved the possibility of applying its domestic rules on taxation of foreign profits and thin capitalization rules designed to prevent excessive indebtedness used to reduce taxable profits.

From the taxpayer’s perspective, a three-year period is now established to challenge improper taxation, and both countries must endeavor to resolve disputes through the Mutual Agreement Procedure (MAP).

2. Brazil-Poland protocol establishing the convention for the avoidance of double taxation and the prevention of fiscal evasion – Decree No. 12,865/2026

This decree promulgates the Agreement for the Avoidance of Double Taxation signed in 2022 in New York, thereby giving effect to provisions that initiate a new phase of tax cooperation between Brazil and Poland.

Similarly to the Brazil–Chile decree, this framework is aligned with the most recent version of the OECD Model Tax Convention, as updated following the BEPS project.

Among the most relevant provisions are:

(i) a 15% withholding tax cap on dividends, except where the beneficial owner is a company holding at least 25% of the capital of the dividend-paying company for an uninterrupted period of 365 days, in which case the maximum rate is reduced to 10% – Article 10;

(ii) a 15% withholding tax cap on interest, except for long-term bank loans (exceeding five years) used to finance infrastructure or equipment, which are subject to a 10% cap – Article 11;

• Juros sobre Capital Próprio – JCP (a brazilian tax-deductible dividend) falls within this rule.

(iii) a withholding tax cap of 15% for the use of trademarks and 10% for patents, copyrights, and industrial or scientific know-how – Article 12;

(iv) authorization for the taxation of consulting or technical services at a rate of up to 10% at source, a provision that is relatively uncommon in international tax treaties of this nature – Article 13.

The treaty also includes provisions defining Permanent Establishment where a company carries out activities in a country for more than 12 months, as well as rules determining that independent professionals and employees are generally taxed in the country where the work is performed, unless the individual remains in the country for fewer than 183 days and remuneration is paid from another jurisdiction.

***

The enactment of Decrees No. 12,863/2026 and No. 12,865/2026 represents a significant step toward aligning Brazil with OECD standards and strengthening its commercial relations with Chile and Poland.

For Brazilian companies operating in these jurisdictions, the new rules provide greater legal certainty and clear mechanisms to prevent the same income from being taxed in two different jurisdictions.

Compliance with these new requirements, particularly anti-abuse provisions and the updated Permanent Establishment definitions, will be essential to ensure access to treaty benefits and to avoid challenges from tax authorities.

Our tax team remains available to assist with the interpretation and application of these new rules.