On 20 October 2025, Brazil signed Organisation for Economic Co-operation and Development's (OECD's) Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). This action aligns Brazil with global efforts to combat tax avoidance and enhance transparency and cooperation in cross-border taxation.

Background

The MLI is a multilateral treaty developed under the OECD/G20 anti-Base Erosion and Profit Shifting (BEPS) Project. It enables jurisdictions to swiftly implement a series of tax treaty-related measures to address BEPS without needing to renegotiate each bilateral treaty individually. The MLI modifies existing tax treaties (referred to as Covered Tax Agreements, or CTAs) to incorporate provisions that prevent treaty abuse, improve dispute resolution and address hybrid mismatches and artificial avoidance of permanent establishment status.

Upon signing the MLI, Brazil submitted a list of CTAs that it intends to modify through the instrument, encompassing 27¹ treaty partners within its network. The MLI will only apply to these treaties if the counterparty jurisdiction has also signed and ratified the MLI and included the treaty with Brazil in its own list of CTAs. To date, 17 jurisdictions² have reciprocally listed Brazil in their own MLI notifications.

These treaties will now be updated to include BEPS minimum standards, such as the Principal Purpose Test (PPT) to prevent treaty abuse, improved dispute resolution mechanisms and clearer definitions of permanent establishments.

Reservations

Brazil has made several reservations to limit the automatic application of certain MLI provisions to its CTAs. Regarding the methods for eliminating double taxation, Brazil has chosen to apply option "C" of the MLI, which is based on the ordinary credit method.

Additionally, Brazil has accepted the application of the PPT as a general anti-abuse rule. However, where feasible, Brazil aims to preserve the Limitation of Benefits (LOB) provisions through bilateral negotiations.

Brazil has also made a reservation regarding the first sentence of Article 16(1) of the MLI. As per the reservation, a Brazilian taxpayer must submit a request solely to the Brazilian tax authorities when the taxpayer considers that the actions of one or both Contracting Jurisdictions have resulted or will result in taxation not in accordance with the provisions of the applicable CTA.

Next steps

Brazil's signing of the MLI marks only the initial phase in a process that must be completed before the MLI can begin modifying Brazil's tax treaties. Now, the MLI must go through the domestic ratification procedures, including legislative scrutiny and endorsement by the National Congress, followed by presidential sanction. Once the domestic legislative process is complete and the MLI has been ratified, Brazil must deposit its Instrument of Ratification with the OECD.

After the deposit, the MLI will enter into force for Brazil on the first day of the month following a period of three calendar months counted from the deposition. Only after this interval will the instrument begin to take legal effect, and its provisions will apply to CTAs according to the type of tax involved — such as withholding taxes or other types — and the fiscal year relevant to Brazil's treaty partner.

Even though this could be a lengthy process, multinational groups with operations in Brazil should actively prepare for the changing landscape of international taxation and seek to understand the potential impact of MLI-related modifications to cross-border tax arrangements and the current business structures in place.