Brazil Enacts Free Trade Agreement with Palestine
On April 11, 2025, the Brazilian government officially enacted Decree No. 12.432, which ratifies the Free Trade Agreement between Mercosul and the State of Palestine. Originally signed in Montevideo on December 20, 2011, the agreement aims to strengthen economic ties and facilitate trade between the Mercosur bloc—comprising Brazil, Argentina, Paraguay, and Uruguay—and Palestine.
The agreement promotes the elimination of trade barriers and the creation of a free trade area, allowing for the smoother exchange of goods among member territories. It reflects a broader effort by Mercosur to diversify trade partnerships and reinforce economic cooperation beyond its traditional allies.
Approved by Brazil’s National Congress through Legislative Decree No. 150 of September 10, 2018, the agreement officially came into force in Brazil on August 9, 2024. The enactment represents a formal step in aligning national legislation with international commitments.
The decree also stipulates that any future revisions or additions to the agreement that could impose significant obligations or financial burdens on Brazil must receive congressional approval. The full text of the decree and the trade agreement is available on the official website of the Brazilian Presidency.
NF-e and NFC-e Updated to Include New Taxes from Brazil’s Tax Reform
In April 2025, Brazil's tax authorities released Technical Note 2025.002, version 1.01, introducing important changes to the layouts of the Electronic Invoice (NF-e) and the Electronic Consumer Invoice (NFC-e). These updates are part of the country’s broader Tax Reform on Consumption (RTC), which aims to modernize and streamline the national tax system.
The new layouts now include fields for the upcoming taxes created under the RTC, ensuring businesses can adapt their invoicing systems ahead of the reform's full implementation. The changes are intended to support transparency and efficiency in tax collection, as well as improve the tracking of goods and services.
These updates are crucial for businesses that rely on NF-e and NFC-e for operations and compliance. Companies are advised to align their systems with the new standards to avoid disruptions and to ensure smooth integration with the tax authority's digital environment.
The implementation of these changes marks a significant step toward Brazil's goal of simplifying its complex tax structure, paving the way for increased economic efficiency and better fiscal control.
Tax rate on the Circulation of Goods and Services rises to 20% on purchases from international websites
Since April 1, 2025, the new 20% tax rate on the Circulation of Goods and Services (ICMS) has been in effect on purchases made on international websites through the Simplified Taxation Regime.
The change affects consumers who place orders of up to US$50, generally through foreign platforms participating in the Federal Revenue Service's Remessa Conforme Program.
Before the change, the ICMS applied was 17%. With the adjustment, the states seek to increase revenue from international e-commerce, which has grown significantly in recent years.
The new rate is already in effect in the following states:
The import tax, which is of federal competence, remains unchanged.
Amid truce in tariff war, Brazilian President sanctions Commercial Reciprocity Law
President Luiz Inácio Lula da Silva has sanctioned the bill that creates the Trade Reciprocity Law, authorizing the Brazilian government to adopt trade measures against countries and blocs that impose unilateral barriers on Brazilian products in the global market. The information was confirmed by the Planalto Palace.
The text, which was published in the Official Gazette of the Union (DOU), was approved by the National Congress and was awaiting presidential sanction to come into effect. There were no vetoes. The new law is a response to the escalation of the trade war that recently broke out involving several countries around the world, led by the United States.
In the case of Brazil, the tariff imposed by the United States was 10% on all products exported to the North American market. The exception to this range of tariffs is steel and aluminum, for which the surcharge imposed by the United States was 25%, significantly affecting Brazilian companies, which are the third largest exporters of these metals to the United States.
New Law – The Trade Reciprocity Law establishes criteria for responses to unilateral actions, policies or practices of a country or economic bloc that “negatively impact Brazil’s international competitiveness”. The rule will apply to countries or blocs that “interfere in Brazil’s legitimate and sovereign choices”.
In Article 3 of the text of the law, for example, the Strategic Council of the Foreign Trade Chamber (CAMEX), linked to the Executive Branch, is authorized to “adopt countermeasures in the form of restrictions on imports of goods and services”, also providing for negotiation measures between the parties before any decision is made.
Council waives WTH tax on income from fund with foreign investor
In a unanimous decision, the 2nd Panel of the 1st Chamber of the 1st Section of the Administrative Council for Tax Appeals (CARF) dismissed the collection of Income Tax Withheld at Source (IRRF) on income from a Brazilian investment fund transferred to an American company controlled by entities in the Cayman Islands and, ultimately, by the Canadian public fund Canada Pension Plan Investment Board (CPPIB). The Federal Revenue Service alleged that the structure was intended to hide the real investor and avoid taxation. CARF understood that the final investor is CPPIB, located in Canada, a country that is not considered a tax haven, thus guaranteeing exemption from IRRF.
The Administrative Council for Tax Appeals (CARF) unanimously decided to waive the requirement for IRRF on income from a Brazilian investment fund transferred to an American company controlled by entities in the Cayman Islands and, ultimately, by the Canadian public fund Canada Pension Plan Investment Board (CPPIB). The Federal Revenue Service alleged that the structure was intended to hide the real investor and avoid taxation. CARF understood that the final investor is CPPIB, located in Canada, a country that is not considered a tax haven, thus guaranteeing exemption from IRRF.
The CARF decision has significant implications for the accounting industry and foreign investors. It reinforces legal certainty for legitimate international investment structures and highlights the importance of a detailed analysis of the investment structure to determine whether or not taxes are levied. In addition, the decision may encourage increased foreign investment in Brazil by demonstrating that legitimate structures will not be unduly penalized.
