Canada-Brazil Income Tax Convention Act, 1984 (S.C. 1985, c. 23, Part IV)

At the moment of the signature of the Convention for the avoidance of double taxation with respect to taxes on income between Canada and the Federative Republic of Brazil, the undersigned, being duly authorized thereto, have agreed upon the following provisions which constitute an integral part of the present Convention.

• 1 With reference to Article III, paragraph 1(d)

  It is understood that in Canada the term person also includes a partnership, an estate and a trust.

• 2 With reference to Article III, paragraph 1(f)

  It is understood that in French the term société also means a corporation within the meaning of Canadian law.

• 3 With reference to Article VI, paragraph 1

  It is understood that in the case of Canada the provisions of Article VI, paragraph 1, shall also apply to profits from the alienation of immovable property not taxed therein as capital gains.

• 4 With reference to Article VII

  It is understood that where an enterprise of a Contracting State has carried on business in the other Contracting State through a permanent establishment situated therein, the profits of the enterprise which are attributable to that permanent establishment and which are received by the enterprise after it has ceased to carry on business as aforesaid, may be taxed in that other State in accordance with the principles laid down in Article VII.

• 5 With reference to Article VII, paragraph 3

  It is understood that the provisions of this paragraph shall apply whether the expenses mentioned therein are incurred in the State in which the permanent establishment is situated or elsewhere.

• 6 With reference to Article X, paragraph 4

  It is understood that in the case of Brazil the term dividends also includes any distribution in respect of certificates of an investment-trust which is a resident of Brazil.

• 7 With reference to Article XI

  It is understood that the commissions arising in Brazil and paid to a Canadian company in connection with services rendered in respect of loans and financings are considered to be interest and subject to the provisions of paragraph 2 of Article XI.

• 8 With reference to Article XII, paragraph 3

  It is understood that the expression “for information concerning industrial, commercial or scientific experience” mentioned in paragraph 3 of Article XII includes income derived from the rendering of technical assistance and technical services.

• 9 With reference to Article XIV

  It is understood that the provisions of Article XIV shall apply even if the activities are exercised by a partnership or a “Sociedade Civil” (Civil Company).

• 10 With reference to Article XVI

  It is understood that, in the case of Brazil, the expression similar council includes the “conselho fiscal” (Statutory Audit Committee).

• 11 It is understood that the relief to be granted by Canada in accordance with the provision of paragraph 5 of Article XXII in respect of the Brazilian corporation tax paid on the profits out of which dividends are paid, shall be determined in accordance with the provision of the Canadian Income Tax Act in force from time to time, provided that in no case dividends to which paragraph 5 of Article XXII applies shall receive a tax treatment in Canada less favourable than that accorded under section 113 of the Canadian Income Tax Act, as in effect on the date of signature of this Convention.

• 12 With reference to Article XXIII, paragraph 2

  It is understood that the provisions of paragraph 5 of Article X are not in conflict with the provisions of paragraph 2 of Article XXIII.

• 13 With reference to Article XXIII, paragraph 3

  It is understood that:

  • (a) the provisions of the Brazilian law which do not allow that royalties as defined in paragraph 3 of Article XII, paid by a company resident of Brazil to a resident of Canada which holds at least 50 per cent of the voting capital of that company, be deductible in determining the taxable income of the company resident of Brazil, are not in conflict with the provisions of paragraph 3 of Article XXIII of the present Convention;

  • (b) in the event that Brazil, after the signature of the present Convention, would allow that royalties, paid by an enterprise which is a resident of Brazil to an enterprise which is a resident of a third State not located in Latin-America, and which holds at least 50 per cent of the capital of the enterprise which is a resident of Brazil, be deductible in determining the taxable income of this enterprise, an equal deduction will be automatically applicable, under similar conditions, to an enterprise which is a resident of Brazil paying royalties to an enterprise which is a resident of Canada;

  • (c) a more-favored tax treatment granted by Brazil after the date of the signature of the present Convention, by virtue of an international Convention, to enterprises, the capital of which is wholly or partly owned or controlled, directly or indirectly, by residents of countries located in Latin-America shall not constitute, for the purposes of the provisions of paragraph 3 of Article XXIII, a discrimination against a Brazilian enterprise owned or controlled under the same conditions above-mentioned by a resident of Canada.

• 14 It is understood that the provisions of this Convention shall not be construed to restrict in any manner any exclusion, exemption, deduction, credit, or other allowance now or hereafter accorded:

  • (a) by the laws of one of the Contracting States in the determination of the tax imposed by that Contracting State, or

  • (b) by any other agreement entered into by a Contracting State.

• 15 It is understood that for the determination of the income tax payable by a resident of a Contracting State in respect of income derived from the other Contracting State, the first-mentioned State shall not consider in any event that such an income is higher than the gross amount of the income paid in the other Contracting State.

• 16 Notwithstanding the provisions of paragraph 6 of Article X and of paragraph 15 of this Protocol, where a resident of Canada controls, directly or indirectly, alone or together with members of a related group or together with not more than four other residents of Canada, a company which is a resident of Brazil and in which he holds an equity percentage of at least 10 per cent, such resident may be subject to tax in Canada on his proportionate share of the aggregate of the company’s net income for any taxation year from property and businesses other than active businesses and the company’s net taxable capital gains for any taxation year from the alienation of property other than property used for active business purposes; for the purposes of this provision, any income from a source in a country other than Canada which pertains to or is incident to an active business carried on in a country other than Canada shall be deemed to be income from an active business.

In witness whereof the undersigned, duly authorized to that effect, have signed this Protocol.

Done in duplicate at Brasilia, this 4th day of June, 1984 in the English, Portuguese and French languages, each version being equally authentic.