U.S. tax law changes and their consequences discussed at event
In late 2017, the Trump administration passed a far-reaching and complex tax reform that, in general terms, reinforces the principle of territoriality to calculate and collect taxes in the United States. This milestone and its aftermath for Brazilian companies were discussed during an event held at FGV’s Sao Paulo Law School (Direito SP) on February 28, organized by Direito SP’s Nucleus for Fiscal Studies (NEF).
The presentation was led by Isaías Coelho, professor of Direito SP’s Lato Sensu Graduate Program (GVlaw), senior researcher at NEF, and member of the Center for Fiscal Citizenship (CCiF). The expert, who worked as a consultant for tax reforms of the International Monetary Fund (IMF), started off by clarifying that these measures were less radical than expected, but they must still undergo further analyses and legislations. According to the professor, the main impact is forcing a reduction of tax rates in other countries.
“Brazil had already been following this trend to improve competitiveness. But our rates are still high compared to other countries that have already been treading this path before us, such as France, England, and the U.S. The new rules will speed up this reduction process”, he said.
The new U.S. tax laws also shifted the taxation axis, which should take on a more territorial approach, which implies many risks according to Isaías Coelho.
“Especially when we consider that a large number of new products and services are not tangible, the biggest hurdle will be how to determine where this taxation will apply”, he said.
For Bernard Appy, Director of the Center for Fiscal Citizenship, an issue that few have noted and that could be another source of concern is the rule that would hinder payments to associated companies overseas.