New double tax treaty promulgated between Brazil and Norway

On March 14, 2025, Decree No. 12,406/2025 was published in Brazil to promulgate a new Double Tax Treaty (DTT) between Brazil and Norway. The new DTT replaces the provisions of the original (enacted in 1981 and amended in 2019) and adapts them to the standards of the Organization for Economic Cooperation and Development (OECD). Compared to Brazil’s existing treaty network, this new agreement includes a number of unprecedented provisions.

Offshore activities

Article 23 of the treaty specifically addresses offshore activities. Offshore activities are considered to be undertakings ‘in connection with the exploration or exploitation of the seabed or subsoil or their natural resources‘.

In this regard, the new DTT provides that:

• Where a Norwegian company carries out offshore activities in Brazil for more than 30 days in a 12-month period, it should be deemed as having a permanent establishment in Brazil.
• If strictly related companies carry out similar activities separately for periods not exceeding 30 days in a 12-month period, the activities should be considered together in counting the 30-day period.
• The salaries, wages and similar remuneration of a Norwegian resident who carries out the above activities in Brazil for more than 30 days in a 12-month period may also be taxable in Brazil, provided that they are conducted offshore.
• The capital gains of a Norwegian company derived from the sale of exploration (research) or exploitation rights derived from them – including rights to interests or rights to receive income from such rights; property used in connection with the above activities; or shares deriving at least a greater part of their value from such rights or property, may be taxed in both Brazil and Norway.

A similar clause regarding offshore activities was included in another double tax treaty signed between Brazil and the United Kingdom. However, that treaty is still awaiting certain procedures required by Brazilian law to be completed before it can come into effect.

Technical services

The DTT also includes a new provision on the taxation of technical services, broadly defined as those of a ‘managerial, technical, or consulting nature’. The clause sets a 10% limit for withholding tax (WHT), which is lower than the domestic rate of 15%. In the previous version of the treaty, technical services were addressed only in the DTT Protocol and were treated as royalties.

Most-favored-nation clause

After the signing date of the DTT, if Brazil agrees via a convention to rates that are lower than the ones provided for dividends, interest, royalties or fees for technical services with any other OECD member state (excluding any state in Latin America), then these lower rates will automatically apply to the DTT signed with Norway.

Other significant changes

Other important provisions have been added, some of which reflect the recent alignment of Brazilian treaties with OECD standards, including:

• Qualification of INE (interest on net equity or ‘JCP’ – juros sobre capital próprio) as interest for treaty purposes, in order to avoid a D/NI outcome (deduction at source + non-inclusion at residence) in virtue of its hybrid features.
• New rules limiting the provision of treaty benefits: the Principal purpose test (PPT), which denies treaty benefits where it is reasonable to conclude that obtaining the given DTT benefit was one of the principal purposes of the arrangement or transaction.
• It is expressly mentioned that the DTT does not cover domestic rules aimed at countering tax evasion and avoidance, including thin capitalization rules and anti-deferral through controlled foreign corporations rules (CFC legislation) or any similar legislation.
• A 10% WHT cap on interest (compared to the domestic rate of 15%) if the beneficial owner is a bank and the loan has been granted for at least five years to finance investment projects or purchases of equipment.

Note that the current DTT Protocol does not include a previous rule granting a withholding tax exemption for income derived from operating vessels that remained in Brazil for less than six months.

Entry into Force

According to Article 30, each of the Contracting States shall notify the other when procedures required by law to make the treaty effective are completed.

The DTT enters into force on the date of receipt of receipt of the last notification from either country and will take effect in the year immediately following the date of entry into force. According to the website of the Brazilian Ministry of Foreign Affairs, both states have already notified the other.

For more information on this topic, please contact Mattos Filho’s Tax practice area.