Brazil-Australia Tax Guide
A practical guide to the tax framework governing transactions, investments, and individuals operating between Brazil and Australia.
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Our Brazil Tax Guide covers the complete Brazilian tax system: corporate taxes, indirect taxes, employment taxes, the tax reform transition, and the key obligations for foreign investors.
Australian imputation credits reduce the effective cost of repatriation. That is the most significant structural feature of the Brazil-Australia relationship.
Brazil and Australia have no bilateral tax treaty in force. Each country taxes cross-border income flows under its own domestic rules, without treaty-reduced withholding rates, permanent establishment safe harbours, or a mutual agreement procedure for resolving transfer pricing disputes. However, Australia’s domestic tax system has a feature that meaningfully reduces the effective double tax burden compared with other non-treaty jurisdictions: fully franked dividends distributed by an Australian holding company carry no Australian withholding tax, since attached franking credits satisfy the withholding obligation. This means that Brazilian IRRF at 10% on dividends flowing from Brazil to Australia is often the primary, and sometimes the only, corporate-level tax cost on the dividend repatriation chain.
This guide covers Brazilian withholding income taxes on outbound payments to Australian recipients, how those taxes stack on a single transaction, Australian income tax on Brazil-sourced income (including the foreign income tax offset and the CFC rules), transfer pricing, and key structuring considerations. Brazil’s IRRF at 10% on dividends under Law 15,270/2025 is the primary withholding cost on the Brazilian side of a dividend flow.
Having no DTA does not mean being double-taxed, but it does mean paying more attention.
Australia has one of the most extensive DTA networks of any country. Brazil is a notable gap. The practical consequences are more limited than they might appear, because Australia’s foreign income tax offset (FITO) under Division 770 of the ITAA 1997 prevents double taxation on the same income in the majority of well-structured arrangements.
Without a DTA, each country applies its domestic rates in full and relief from double taxation depends on unilateral provisions. The more significant constraint is the absence of a mutual agreement procedure: if the Australian Taxation Office (ATO) and the Federal Revenue Department adjust the same transaction in different directions, the resulting double taxation must be resolved through domestic proceedings in each country.
Both Brazil and Australia participate in the OECD Common Reporting Standard (CRS) and are signatories to the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The ATO and the Federal Revenue Department exchange financial account data on their respective residents annually. The absence of a DTA does not reduce the visibility of cross-border structures to either tax authority.
The main taxes that affect cross-border operations
The following taxes arise in virtually every substantive business relationship between Australian and Brazilian entities. Each operates independently; satisfying one obligation does not reduce or eliminate any other.
No single mechanism eliminates double taxation between Australia and Brazil. Every cross-border payment stream must be modelled from both sides, applying each country’s domestic rules independently. The combined tax cost is typically higher than it would be under a treaty relationship.
The 34% headline rate is not what most Brazilian companies actually pay
The 34% combined IRPJ/CSLL rate applies under the Actual Profit regime, where tax is calculated on audited net profit. Many Brazilian companies instead use the Deemed Profit regime, which produces substantially lower effective rates and has important implications for Australian investors modelling their FITO position and Pillar Two exposure.
A Brazilian entity on the Deemed Profit regime may carry a low effective tax rate relative to its actual profitability. Australia enacted its Pillar Two global minimum tax rules under the Treasury Laws Amendment (Global Minimum Tax) Act 2024, effective for income years from 1 January 2024. Australian-headquartered multinationals with Brazilian subsidiaries should assess GloBE exposure where the effective tax rate may fall below the 15% floor despite Brazil’s 34% headline rate.
Brazilian withholding income taxes on payments to Australian recipients
Brazil imposes Withholding Income Tax (IRRF) on most categories of income paid to non-resident recipients, including Australian entities and individuals. Australia is not on Brazil’s list of low-tax jurisdictions, so standard rates apply.
Other Brazilian taxes that apply alongside the IRRF
2026 is the first transitional year of Brazil’s new dual-GST system, introduced by Constitutional Amendment 132/2023 and regulated by Complementary Law 214/2025. Full abolition of PIS and COFINS begins in 2027, with IBS replacing ICMS and ISS through 2033. CBS and IBS are structurally comparable to Australia’s GST. See our Brazil tax reform guide for a full overview.
How Brazilian taxes stack up on a single transaction
When a Brazilian entity makes a payment to an Australian recipient, multiple Brazilian taxes can apply simultaneously. The examples below use a base contract value of AUD 100,000 and standard non-cumulative rates. IOF is excluded given its variability.
Borne by the Australian provider − AUD 15,000
Additional cost borne by Brazilian payer + AUD 1,650
Additional cost borne by Brazilian payer + AUD 7,600
Additional cost borne by Brazilian payer + AUD 5,000
Borne by the Australian licensor − AUD 15,000
Additional cost borne by Brazilian payer + AUD 10,000
Withheld by Brazilian subsidiary − AUD 10,000
On AUD 100,000 before FITO AUD 30,000
Creditable under s.770-10; subject to cap − AUD 10,000
Borne by the Australian lender − AUD 15,000
On AUD 100,000 before FITO AUD 30,000
Subject to FITO cap − AUD 15,000
Importing physical goods into Brazil
The examples above apply to financial flows and services. Physical goods exported from Australia into Brazil face a separate and cumulative customs and indirect tax regime, including Import Tax (II), IPI, PIS/COFINS-Import at goods rates, and ICMS on a grossed-up base. Australia has no free trade agreement with Brazil, so the full Mercosur Common External Tariff (TEC) applies. The combined burden typically adds 40-70% or more to the CIF value.
Rate set by NCM code; typically 0-35%. No Australia-Brazil FTA; TEC rates apply. + AUD 12,000
Varies by product; 0% for many categories. + AUD 5,600
Goods rate; higher than the 1.65% service rate. + AUD 2,100
Goods rate; higher than the 7.6% service rate. + AUD 9,650
State rate varies 12-25% by state and product. + AUD 28,394
Sea freight only; illustrative freight AUD 5,000. + AUD 1,250
These are simplified illustrations. The actual tax burden depends on the classification of the payment, the applicable FITO cap, whether the Brazilian entity is on the Actual Profit or Deemed Profit regime, IOF rates at the time of currency conversion, the availability of the 50% CGT discount, and the impact of Brazil’s indirect taxes reform during the transition. These figures illustrate the stacking effect and are not a substitute for transaction-specific advice.
Australian taxation of Brazil-sourced income
Australia taxes its residents on worldwide income. Brazil-sourced income received by Australian residents is subject to Australian income tax, with relief available through the foreign income tax offset (FITO) under Division 770 of the ITAA 1997. Three mechanisms are particularly significant: the FITO, the CFC rules, and the CGT discount on disposal of Brazilian assets held for more than 12 months.
Australian residents who pay foreign income tax on foreign-sourced income may claim a dollar-for-dollar offset under s.770-10 of the ITAA 1997, limited to the Australian tax on that income. Excess credits are lost and cannot be carried forward or back.
Under Part X of the ITAA 1936, a Brazilian company is a CFC if Australian residents control more than 50%. The rules target passive “tainted income”; active business income generally escapes attribution.
Companies are not entitled to the discount. Individuals and trusts holding Brazilian assets over 12 months may reduce the net gain by 50% under Subdivision 115-A, though the FITO cap is based on the full pre-discount foreign income.
When an Australian company receives a dividend from its Brazilian subsidiary (net of 10% IRRF), it includes the gross amount in assessable income and claims a FITO. Having paid Australian corporate tax at 30% (net of the FITO), it can frank its own dividends to that extent, so the Brazilian IRRF ultimately flows through as a reduction in available franking credits, not a separate additional cost at the shareholder level.
Two OECD-aligned systems without a MAP
Both Brazil and Australia now apply transfer pricing rules aligned with the OECD arm’s-length standard. The absence of a DTA means there is no mutual agreement procedure to resolve disputes arising from transfer pricing adjustments in either country.
Brazil’s new transfer pricing rules
Law 14,596/2023 and IN RFB 2,161/2023 replaced Brazil’s former fixed-margin transfer pricing system with rules fully aligned with the OECD Transfer Pricing Guidelines, effective from 2024.
Australia’s transfer pricing rules
Under Subdivision 815-B of the ITAA 1997, the ATO requires contemporaneous documentation for significant related-party dealings. Entities above AUD 2 million must lodge the International Dealings Schedule; Country-by-Country Reporting applies above AUD 1 billion consolidated revenue.
Australia’s thin capitalisation rules, amended from 1 July 2023, now use a fixed ratio test (net debt deductions capped at 30% of EBITDA) as the default. Brazil limits interest deductions on related-party debt under Law 12,249/2010. Intercompany loans must satisfy both regimes simultaneously; all advance certainty must come through each country’s unilateral APA programme.
Structuring considerations for Australian investors in Brazil
In the absence of a DTA, the holding structure chosen for an Australian investment in Brazil has a direct and material impact on the overall tax burden and on the availability of the FITO and the CGT discount.
Holding structure
Key takeaways for Australian investors
Need advice on your Brazil-Australia tax structure?
The interaction of Brazilian and Australian tax rules in the absence of a DTA requires careful, transaction-specific analysis. Contact us to discuss your situation.
This page is a summary only and does not constitute legal advice.
More bilateral tax guides
All Guides →This guide is a general overview only and does not constitute legal or tax advice. Tax laws in both countries change frequently. The specific tax treatment of any transaction depends on the facts, the structure adopted and the current state of the law in each jurisdiction. Obtain specific legal and tax advice before structuring any cross-border transaction.
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