Tax Treaty Case Law around the Globe 2019

S. 301. Introduction

In 2005, Lang suggested that scholars should draw more attention to article 2 of the Model Conventions. Since then, many scholars have accepted the challenge and some have sought to answer the question of what is a substantially similar tax under article 2(4) of the Model Conventions.

Up until the millennium, however, many Brazilian scholars had already considered this question. Given the creation of the Social Contribution on Profits (CSL) by Law 7,689/1988 after the enactment of the Brazilian Federal Constitution in 1988, Brazilian scholars had to look at whether the CSL could be considered an “identical or substantially similar” tax, “subsequently imposed in addition to” federal tax on income – as expressed in the Brazilian double taxation conventions (DTCs).

Many Brazilian scholars maintained that the CSL would have almost the same taxable event and tax base as the Brazilian Corporate Income Tax (Imposto sobre a Renda das Pessoas Jurídicas, IRPJ), because both taxes are levied on the net income of the fiscal year concerned. Therefore, the DTCs concluded prior to Law 7,689/1988 would be interpreted as comprising the CSL, as it would be an “identical or substantially...