On 18 December 2015, the Brazilian tax authorities included Dutch holding companies lacking economic substance ("Dutch holdings") on the list of privileged tax regimes (the "List").

In 2010, the Brazilian tax authorities had already included the Dutch holdings on the List. However, at that time, this decision was suspended by the Brazilian tax authorities upon the request of the Dutch Government.

Inclusion of Dutch holdings on the List might trigger several adverse tax consequences with respect to both inbound and outbound investments in and from Brazil. However, the effective impact of such inclusion for a specific situation needs to be investigated on a case-by-case basis.

Substantial economic activity

The Brazilian tax authorities did not provide any guidance of what they consider as "substantial economic activities". However, it is expected that a mere holding company (of a limited number of subsidiaries) will, in any case fall, within the scope of the term "Dutch holding".


There are some possible tax consequences to be considered in relation to the inclusion of the Dutch holdings on the List.

More specifically, when considering investments from the Netherlands in Brazil, the main consequences in a nutshell are:

  • The thin capitalization ratio will be stricter (0.3:1 instead of 2:1) for loans granted by the Dutch holding to the Brazilian debtor;
  • Additional requirements must be satisfied for the deductibility of payments of any kind made to the Dutch holding (proof of expenses, of the operational capacity and identity of the beneficiary);
  • Brazilian transfer pricing rules will apply to the commercial relations between the Dutch holding and any Brazilian party;
  • Charter payments to Dutch entities, in excess to the threshold limits provided by Law # 13,043/14, will be subject to 25% Brazilian withholding income tax (without considering treaty application).

Restructuring alternatives

Depending on the specific fact-pattern, there might be certain ways to mitigate the risk that Dutch companies are qualified as Dutch holdings and consequently included on the List and, more in general, to avoid the adverse tax consequences mentioned above.

Latest developments

On 25 January 2016, the Dutch State Secretary of Financed informed the Dutch parliament that he will request Brazil officially to remove the Dutch holdings from the List and to explain how the term substantial economic activity should be defined. In addition, he will also request Brazil to re-negotiate and modernize the existing tax treaty with Brazil in line with the BEPS initiative.