On May 25, 2017, Brazil published RFB Normative Instruction No. 1,709/2017 in the official gazette to amend certain parts of the country-by-country (CbC) reporting rules in Normative Instruction No. 1,681/2016 (issued on December 29, 2016).
Brazil introduced CbC reporting via Normative Instruction No. 1,681/2016 for fiscal years that begin on or after January 1, 2016, in compliance with BEPS Action 13. Multinational groups with total consolidated revenue in the preceding fiscal year of at least R$2,260,000,000 (if the ultimate parent is tax resident in Brazil) or €750 million, or the local equivalent of the ultimate parent’s resident tax jurisdiction as of January 31, 2015, are required to file a CbC report.
The first CbC report will apply for fiscal years beginning January 1, 2016, and ending December 31, 2016, and must be filed by July 31, 2017. If a group’s ultimate parent has a fiscal period that either did not end in 2016, or has a closing date in 2016 but began in 2015, this group is not required to file the CbC report in 2017.
2016 Transitional Relief
The primary amendment in Normative Instruction No. 1,709/2017 is the addition of CbC reporting transitional relief for the 2016 fiscal year, where a competent authority agreement (CAA) for the exchange of CbC reports is not in force between Brazil and the ultimate parent entity’s jurisdiction by July 31, 2017 (i.e., the due date for filing initial CbC reports in Brazil).
Normative Instruction No. 1,709/2017 says that when the foregoing situation applies, a Brazilian constituent entity of a foreign-parented group may indicate the ultimate parent entity as the reporting entity on its CbC reporting notification in Brazil for 2016 even if a CAA is not in place by the Brazilian due date (July 31, 2017, for 2016 filings).
If a CAA is not concluded between Brazil and the jurisdiction of the ultimate parent entity by December 31, 2017, such as with the U.S., the Brazilian constituent entity will have 60 days thereafter to amend its 2016 CbC reporting notification, and file a CbC report for 2016 or identify a surrogate entity on behalf of the group.
As of June 15, 2017, the U.S. has not signed a CAA with Brazil on the exchange of CbC reports.