The relevance of the OECD and UN Model Conventions and their Commentaries
on the interpretation of Brazilian tax treaties
Tax treaties are not a frequent issue in Brazilian courts, particularly if one
considers the judicial decisions. Specifically concerning interpretation, one
could recall a recent decision about the application of Article 7 to services
(instead of Article 21, as claimed by tax authorities), but even this case has
not yet been concluded.
As a matter of fact, several tax cases do not even reach the judicial courts,
since Brazilian law has an Administrative Review Procedure whereby taxpayers may
bring their claims to the so-called Administrative Council of Administrative
Appeals (Conselho Administrativo de Recursos Fiscais (CARF)),
which replaced the Taxpayers' Council that existed until 2009. CARF is a very
specialized group of experts, chosen among both tax authorities and taxpayers,
which is supposed to review tax assessment in a way similar to a judicial
procedure.
CARF has recently made some interesting decisions concerning tax treaties,
particularly since Brazil adopted a full-transparency regime on its worldwide
taxation, which is claimed to be against Article 7 of Brazilian tax treaties. In
some cases, CARF understood that Article 7 would prevail before Brazilian
legislation and, in others, that the treaty would not be applicable.