Brazil-Denmark Tax Treaty Guide
One of Brazil's oldest tax treaties, in force since 1974 and narrowed by a 2019 protocol. A practical guide to what it provides, what changed, and what Brazilian and Danish taxes still apply.
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Signed in Copenhagen in 2011 and promulgated for Brazil by Decree 9,851/2019, the protocol replaced Denmark's original exemption of Brazil-sourced income with an ordinary tax credit, a structural change that outlasts any single royalty or dividend rate.
A 1974 treaty is still the legal foundation, but a narrow 2019 protocol quietly changed how it works for Danish investors.
Brazil and Denmark signed their double tax agreement in Copenhagen on 27 August 1974, promulgated by Decree 75,106/1974, making it one of Brazil's earliest treaties. A protocol signed in 2011 entered into force for Brazil in 2019 and was promulgated by Decree 9,851/2019: rather than modernising withholding rates the way the 2019 Brazil-Sweden protocol did, it replaced Denmark's method for relieving double taxation, from an exemption of Brazil-sourced income to an ordinary foreign tax credit, and removed the paragraphs that had let Danish groups keep undistributed Brazilian profits and shares outside Danish taxation.
This guide covers what the amended treaty provides and, importantly, what it does not (technical services are not carved out of the royalties article for Denmark the way they are for Sweden, Finland, Austria, France and Japan), Brazilian withholding income taxes on outbound payments to Danish recipients, how those taxes stack on a single transaction, Danish corporate taxation of Brazil-sourced income (the participation exemption, the credit method and the CFC rules), transfer pricing under the treaty's mutual agreement procedure, and structuring considerations.
What the 1974 treaty, as amended in 2019, actually provides
The Brazil-Denmark DTA follows the same 1970s-era model Brazil used for its earliest European treaties: it caps withholding on dividends, interest and royalties, defines permanent establishment, and provides a mutual agreement procedure (MAP) for resolving double-taxation disputes. Being based on a pre-BEPS text, it lacks a mandatory arbitration backstop to the MAP and does not include the entitlement-to-benefits or most-favoured-nation clauses found in Brazil's more recently negotiated treaties, such as the amended Brazil-Sweden DTA.
Because Brazil's domestic IRRF on dividends is now 10% under Law 15,270/2025, below the treaty's 15% cap, the DTA no longer reduces the dividend withholding rate in practice; the domestic rate simply applies. The treaty's remaining practical value for a Danish investor lies in the royalty rate caps, the interest cap, PE protection, and the MAP.
Most of Brazil's treaty protocols extend the royalties article to technical services and technical assistance, which removes the article 7 (business profits) exemption that would otherwise apply to a service fee with no Brazilian permanent establishment. Denmark is not among the handful of exceptions (Austria, Finland, France, Japan and Sweden) whose protocols keep technical services under article 7. A Danish service provider without a Brazilian PE should therefore expect Brazilian withholding on a technical service fee, generally under the royalties cap, where a similarly placed Swedish provider might escape it entirely.
The main taxes that affect cross-border operations
The following taxes arise in virtually every substantive business relationship between Danish and Brazilian entities. Each operates independently; satisfying one obligation does not reduce or eliminate any other.
The treaty resolves double taxation on dividends, interest and most royalties; it does not touch Brazilian indirect taxes, IOF, or Danish VAT, and it does not exempt technical service fees the way a handful of Brazil's other treaties do. Every cross-border payment stream still needs to be modelled against the full domestic tax stack on both sides.
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 matters directly to a Danish parent assessing CFC exposure under Danish rules and Pillar Two obligations.
A Brazilian entity on the Deemed Profit regime may carry a low effective tax rate relative to its actual profitability. Denmark's CFC rules in Selskabsskatteloven §32 attribute a controlled foreign company's income to its Danish parent where more than 50% of the CFC's income is financial (passive) income and the parent controls it, subject to a substance-based carve-out; an operating Brazilian subsidiary on the Actual Profit regime will not typically be caught. Denmark implemented the Pillar Two global minimum tax under the Minimumsbeskatningsloven, effective for financial years beginning on or after 31 December 2023; Danish-headed groups with Brazilian subsidiaries taxed under the Deemed Profit regime should assess GloBE exposure where the effective rate may sit below the 15% floor.
Brazilian withholding income taxes on payments to Danish recipients
Brazil imposes Withholding Income Tax (IRRF) on most categories of income paid to non-resident recipients. Where the treaty caps a rate below the Brazilian domestic rate, the treaty rate applies, subject to Danish residency certification.
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. None of this is affected by the treaty, which addresses income taxes only. 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 a Danish recipient, multiple Brazilian taxes can apply simultaneously. The examples below use a base contract value of EUR 100,000 and standard non-cumulative rates. IOF is excluded given its variability.
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Importing physical goods into Brazil
The examples above apply to financial flows and services. Physical goods exported from Denmark into Brazil face a separate and cumulative customs and indirect tax regime, entirely outside the treaty's scope: Import Tax (II), IPI, PIS/COFINS-Import at goods rates, and ICMS on a grossed-up base. There is no free trade agreement between Brazil and Denmark; the EU-Mercosur agreement, once ratified, would phase down tariffs on most EU-origin industrial goods. The combined burden typically adds 40-70% or more to the CIF value.
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These are simplified illustrations. The actual tax burden depends on the classification of the payment under the treaty, whether the Danish credit method or the Danish CFC rules apply, IOF rates at the time of conversion, and the Brazilian entity's tax regime. These figures illustrate the stacking effect and are not a substitute for transaction-specific advice.
Danish taxation of Brazil-sourced income
Denmark taxes its resident companies on worldwide income at a flat 22%. Brazil-sourced income received by Danish companies is subject to Danish corporate income tax, with relief available through the participation exemption, the foreign tax credit under Ligningsloven §33, and the treaty. Since the 2019 protocol, the credit method rather than the exemption method is the default relief mechanism outside the participation exemption.
Dividends and capital gains on shares held for at least 12 months, representing 10% or more of the capital of the Brazilian subsidiary, are exempt from Danish corporate tax under Selskabsskatteloven §13 and Aktieavancebeskatningsloven §8. Below the 10% threshold, the shareholding is taxed as a portfolio holding, generally on a mark-to-market basis.
Where the participation exemption does not apply, Denmark now credits the Brazilian IRRF against Danish tax on the same income under Ligningsloven §33, rather than exempting the income outright as the pre-2019 treaty required. The credit is limited to the Danish tax attributable to the Brazilian income.
A Brazilian subsidiary is a CFC under Selskabsskatteloven §32 if more than 50% of its income is financial (passive) income and the Danish parent controls it. An operating Brazilian company taxed under the Actual Profit regime, deriving active business income, will not typically be caught.
A Danish company disposing of a qualifying (10%+, 12-month) shareholding in a Brazilian subsidiary has no Danish tax on the gain under the participation exemption, but the treaty generally preserves Brazil's right to tax the gain at source. The Brazilian IRRF on disposal (15% up to BRL 5m, rising to 22.5% above BRL 30m) is therefore usually a real, uncredited cost from the Danish side, since there is no Danish tax base against which to credit it once the exemption applies.
Transfer pricing: two OECD-aligned systems, with a MAP but no arbitration clause
Both Brazil and Denmark apply transfer pricing rules aligned with the OECD arm's-length standard. The treaty's mutual agreement procedure provides a bilateral mechanism to resolve disputes, but, being a pre-BEPS text, it does not include a mandatory arbitration backstop if the two tax authorities cannot agree.
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.
Denmark's transfer pricing rules
Danish transfer pricing rules under Skattekontrolloven §§39-46 require contemporaneous documentation from most companies with related-party cross-border transactions, following OECD methodology. The Danish Tax Agency (Skattestyrelsen) imposes significant penalties for missing or inadequate documentation, independent of any adjustment.
Denmark applies a debt-to-equity safe harbour of 4:1 for controlled debt, an asset-based interest ceiling, and an EBITDA-based earnings-stripping rule capping net financing costs at 30% of tax EBITDA under Selskabsskatteloven §§11-11C. Brazil separately limits related-party interest deductions under Law 12,249/2010 where debt exceeds twice the creditor-attributable net equity. Intercompany loans between Denmark and Brazil must satisfy both regimes independently.
Structuring considerations for Danish investors in Brazil
The 2019 protocol's switch to the credit method makes the Danish participation exemption, rather than the treaty itself, the primary driver of the tax outcome for most Danish equity investment into Brazil.
Holding structure
Key takeaways for Danish investors
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The interaction of the amended treaty with Brazilian and Danish domestic rules requires careful, transaction-specific analysis. Contact us to discuss your situation.
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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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