Withholding Income Tax at a Zero Rate and Export Financing

On February 23, the Brazilian Federal Government published Decree No. 12,851/2026, delegating regulation of the method for proving the allocation of financing to exports to the Special Department of Federal Revenue of Brazil (Receita Federal, “RFB”).

01.  Pursuant to Article 1, XI, of Law No. 9,481/1997, interest and commissions related to credits obtained abroad and intended for financing exports earned by residents or those domiciled abroad are subject to a zero rate (“0%”) of Withholding Income Tax (“WHT”), provided that the conditions, forms, and deadlines established by the Executive Branch are observed.

02. In this context, of particular note is the financing structure through Export Prepayment (“EPP”), which consists of receiving advance receipt through the raising of foreign funds in anticipation of future exports of goods or services that will be made in payment of the debt incurred, as provided by Resolution No. 278/2022 of the Brazilian Central Bank (“BACEN”). Thus, PPE transactions allow Brazilian entities to raise foreign funds from importers, foreign legal entities, or financial institutions abroad in order to finance their exports of goods and/or services, which, in turn, serve as payment of the debt incurred. According to BACEN regulations, the amortization of these transactions must be made through the shipment of goods or provision of services, and the respective interest may be paid through financial transfers or exports.

03. With regard to the WHT 0% rate, Decree No. 6,761/2009 (in line with the provisions of Ordinance of the Minister of Finance (“MF”) No. 70/1997) establishes, in Article 6, that the application of this benefit is “conditioned on the amounts paid, credited, used, delivered, or remitted by a source domiciled in Brazil to legal entities domiciled abroad being effectively allocated to export financing.” For these purposes, paragraph 1 provided that such proof, by the institution authorized to operate in the foreign exchange market, would be made by comparing the relevant daily global accounting balances, observing the specific rules issued by BACEN.

04. However, on 23 February, the Executive Branch published Decree No. 12,851/2026, amending the wording of said paragraph 1 of Article 6 of Decree No. 6,761/2009, to provide that the RFB may regulate the method of proof, by the institution authorized to operate in the foreign exchange market, of the allocation of credits obtained abroad to financing of exports.

05. The new wording, therefore, appears to grant the RFB greater discretion to establish requirements for proving the allocation of funds raised in export financing transactions, such as EPP. It should be noted that, as of the time of writing, the respective regulation has not been published by the RFB.

06. In light of this scenario, we recommend that clients closely monitor the RFB's regulations on this matter and carefully assess any potential impacts on export financing structures. Our Tax team is at your disposal to assist with these analyses and other tax matters of interest.