The Federal Regional Court of the First Region denied in April the incidence of income tax on monthly amounts paid by Brazilian companies to three companies in Portugal without offices in Brazil. The payments, around eight million euros, were made for the construction of the Porto’s Club Football Museum and the rental of publicity spaces.

The companies argued that the Brazil-Portugal Convention, in its article seven, does not allow the charge of income tax in Brazil, since it must only be paid in Portugal in accordance to Portuguese legislation. The court agreed and also ruled that the profits of a company established in one of the membercountries of the convention can only be charged in this country, unless the company exercises activities in the other Nation, through a stable office.

For foreign companies with business in Brazil, but without head offices in the country, this is another piece of good news.