Tax Treaty Case Law around the Globe 2022

2.1. Introduction

This chapter discusses a case (Montagna case) involving the taxation of bank deposits of an unknown source that should be attributed to Tarcisio Montagna (taxpayer) as a Brazilian resident according to Brazilian tax authorities. The taxpayer challenged the tax assessment before the Brazilian Administrative Council of Tax Appeals (CARF). The fiscal year at dispute is 2004.

The case is comprised of two main controversial points. Firstly, whether the taxpayer was a tax resident in Brazil in 2004, not only for domestic purposes but also under the Brazil-Italy Income Tax Treaty (1978). Secondly, whether the bank deposits of an unknown source made between 2002 and 2005 could be deemed to be attributable to the taxpayer for Brazilian income tax purposes.

While setting aside the question of whether the bank deposits could be deemed to be attributable to the taxpayer, this article focuses on the issue of tax residence, both under Brazilian domestic law and under the Brazil-Italy Income Tax Treaty (1978).

2.2. Facts of the case

The taxpayer stayed in Brazil for 79 days in 2004. At that time, he worked for the Brazilian company Verona Garden Ltda. In that period, some bank depo...