The relevance of the OECD and UN Model Conventions and their Commentaries on the interpretation of Brazilian tax treaties

Tax treaties are not a frequent issue in Brazilian courts, particularly if one considers the judicial decisions. Specifically concerning interpretation, one could recall a recent decision about the application of Article 7 to services (instead of Article 21, as claimed by tax authorities), but even this case has not yet been concluded.

As a matter of fact, several tax cases do not even reach the judicial courts, since Brazilian law has an Administrative Review Procedure whereby taxpayers may bring their claims to the so-called Administrative Council of Administrative Appeals (Conselho Administrativo de Recursos Fiscais (CARF)), which replaced the Taxpayers' Council that existed until 2009. CARF is a very specialized group of experts, chosen among both tax authorities and taxpayers, which is supposed to review tax assessment in a way similar to a judicial procedure.

CARF has recently made some interesting decisions concerning tax treaties, particularly since Brazil adopted a full-transparency regime on its worldwide taxation, which is claimed to be against Article 7 of Brazilian tax treaties. In some cases, CARF understood that Article 7 would prevail before Brazilian legislation and, in others, that the treaty would not be applicable.