The relevance of the OECD and UN Model Conventions and their Commentarieson the interpretation of Brazilian tax treaties

Tax treaties are not a frequent issue in Brazilian courts, particularly if oneconsiders the judicial decisions. Specifically concerning interpretation, onecould recall a recent decision about the application of Article 7 to services(instead of Article 21, as claimed by tax authorities), but even this case hasnot yet been concluded.

As a matter of fact, several tax cases do not even reach the judicial courts,since Brazilian law has an Administrative Review Procedure whereby taxpayers maybring their claims to the so-called Administrative Council of AdministrativeAppeals (Conselho Administrativo de Recursos Fiscais (CARF)),which replaced the Taxpayers' Council that existed until 2009. CARF is a veryspecialized group of experts, chosen among both tax authorities and taxpayers,which is supposed to review tax assessment in a way similar to a judicialprocedure.

CARF has recently made some interesting decisions concerning tax treaties,particularly since Brazil adopted a full-transparency regime on its worldwidetaxation, which is claimed to be against Article 7 of Brazilian tax treaties. Insome cases, CARF understood that Article 7 would prevail before Brazilianlegislation and, in others, that the treaty would not be applicable.