Withholding Tax Rates: India to Brazil Under DTAA

India to Brazil Withholding Tax Rates Under DTAA

When an Indian entity makes payments to a Brazilian resident — whether dividends, interest, royalties, or technical service fees — withholding tax must be deducted at source under Section 195 of the Income Tax Act, 1961. The India-Brazil DTAA, signed on 26 April 1988 and in force from 11 March 1992, was substantially revised by an amending protocol signed at Brasília on 24 August 2022. The protocol entered into force on 18 October 2025, and its revised rates apply for income arising in India from FY 2026-27 onward (1 April 2026) — so the rates below are the current, in-force rates, not the pre-protocol ones.

The treaty is based on the UN Model Tax Convention. Notably, Brazil has not signed the OECD Multilateral Instrument (MLI), so the India-Brazil treaty is unmodified by MLI provisions; anti-abuse protection instead comes from the new Article 26-A (Principal Purpose Test and Limitation of Benefits) introduced by the 2022 protocol. Under Section 90(2) of the Income Tax Act, taxpayers can apply whichever rate — the treaty rate or the domestic rate — is more beneficial. For the full treaty analysis, see our India-Brazil DTAA complete guide.

Dividend Withholding Rates

Under Article 10 of the India-Brazil DTAA as revised by the 2022 protocol, dividends paid by an Indian company to a Brazilian resident are subject to a two-tier withholding rate:

Key points: The revised India-Brazil DTAA introduces a lower 10% rate for corporate shareholders meeting the 20%-holding and 365-day tests, and a 15% rate for all other dividends — both a saving against the domestic rate of 20%. Since India abolished the Dividend Distribution Tax (DDT) from 1 April 2020, dividends are taxable in the hands of the recipient, making the treaty rate directly relevant for Brazilian shareholders.

Brazilian parent companies with substantial, long-held stakes in Indian subsidiaries should confirm they meet the 20%/365-day test to access the lower 10% rate on dividend repatriation, rather than defaulting to the 15% general rate.

Interest Withholding Rates

Article 11 of the treaty as revised by the 2022 protocol provides three tiers for interest payments:

The interest provisions provide a saving for Brazilian lenders: a loan granted by a bank for at least five years to finance the purchase of equipment or an investment project qualifies for the lower 10% rate, while other interest is taxed at 15% — both against the domestic 20% rate. This reduces the effective cost of external commercial borrowings from Brazil where the qualifying conditions are met. Interest paid to the Government, political subdivisions, local authorities, or central banks (including the Reserve Bank of India and Banco Central do Brasil) remains fully exempt from withholding tax. One carve-out: under Article 11(3)(b), interest from securities, bonds or debentures issued by the Government of a contracting state, a political subdivision, or a wholly-owned agency is taxable only in the issuing state — so interest on Indian government securities paid to Brazilian holders sits outside the 10%/15% treaty caps and is taxed in India at domestic rates.

Interest is deemed to arise in India when the payer is an Indian resident. Where the underlying debt is connected with a permanent establishment in India that bears the interest, the interest is deemed to arise in India regardless of the payer's residence.

Royalty and FTS Withholding Rates

The 2022 amending protocol changed the royalty and FTS structure significantly. Article 12 now covers royalties with a differentiated rate by type, and a new Article 12-A gives fees for technical services (FTS) their own standalone rate for the first time:

Important note on trademark royalties: Before the 2022 protocol, the treaty rate on trademark royalties was 25% — higher than the domestic rate, so taxpayers elected the domestic rate under Section 90(2). The revised treaty lowers the trademark rate to 15%, which is now more beneficial than the domestic 20% rate. Companies still defaulting to the old 25% figure, or to the domestic 20% rate out of habit, are overpaying — the current treaty rate of 15% should be applied to trademark royalty payments to Brazilian entities.

For all other royalty categories — patents, copyrights, technical know-how, secret formulas, and equipment rentals — the treaty rate is now 10%, a 10 percentage point saving over the domestic rate.

Unlike the pre-protocol treaty, which had no separate FTS provision and taxed technical/consultancy services under the royalties article at 15% (or as business profits under Article 7 absent a PE), the India-Brazil treaty now has a dedicated FTS article — Article 12-A — taxing such fees at 10% of the gross amount.

Capital Gains Treatment

Article 13 of the India-Brazil DTAA addresses capital gains with several distinct provisions:

Immovable property: Gains from the alienation of immovable property situated in India are taxable in India at domestic rates — 12.5% for long-term capital gains (held over 24 months) and the rates otherwise applicable to the taxpayer for short-term gains.

PE-related assets: Gains from the alienation of movable property forming part of the business property of a permanent establishment are taxable in the state where the PE is situated.

Ships and aircraft: Gains from the alienation of ships or aircraft operated in international traffic are taxable only in the state of the enterprise operating them.

Shares and other property: Gains from the alienation of shares in an Indian company may be taxed in India, and gains from the alienation of any other property may be taxed in both contracting states.

Brazilian residents disposing of Indian assets should claim a foreign tax credit in Brazil for taxes paid in India to avoid double taxation.

How to Apply Reduced Rates

To apply the reduced DTAA rates instead of domestic rates, both the Brazilian recipient and the Indian payer must follow specific procedures:

For the Brazilian Recipient

1. Obtain a Tax Residency Certificate (TRC) — The Brazilian resident must obtain a TRC from the Receita Federal do Brasil certifying their Brazilian tax residency for the relevant fiscal year
2. Complete Form 10F — Furnish Form 10F to the Indian payer with prescribed details including name, status, nationality, CNPJ/CPF tax identification number, and period of residential status
3. Self-declaration — Provide a declaration confirming beneficial ownership of the income and absence of a PE in India (if applicable)

For the Indian Payer

1. Verify documentation — Ensure TRC, Form 10F, and self-declaration are on file before applying reduced rates
2. File Form 15CA online — Submit Form 15CA on the Income Tax portal before making the remittance
3. Obtain Form 15CB — For payments exceeding INR 5 lakh, obtain a Chartered Accountant's certificate in Form 15CB
4. Apply under Section 195(2) where a lower rate needs determining — the Indian payer applies to the Assessing Officer under Section 195(2) to determine the appropriate proportion chargeable to tax; the Section 197 lower or nil withholding certificate is applied for by the Brazilian payee, not by the payer

Domestic Rates vs Treaty Rates Comparison

India's domestic withholding tax rates for non-residents (without surcharge and cess) compared with the India-Brazil DTAA rates:

Important note on surcharge and cess: Under domestic law, the withholding rate is further increased by applicable surcharge and health and education cess of 4%, leading to effective rates of approximately 20.8% to 21.84%. When treaty rates are applied, surcharge and cess are not levied on top of the treaty rate, making the effective savings even greater.

Common Mistakes and Compliance Tips

Mistake 1: Applying the Stale Pre-2022-Protocol Trademark Rate

The most common error is applying the pre-protocol treaty rate of 25% (or defaulting to the domestic 20% rate out of old habit) on trademark royalty payments to Brazilian entities. Since the 2022 protocol took effect, the treaty rate on trademark royalties is 15% — now more beneficial than the domestic 20% rate. Under Section 90(2), the more beneficial rate always applies, which today is the current treaty rate.

Mistake 2: Not Obtaining TRC Before Remittance

Many payers apply treaty rates without collecting the Tax Residency Certificate from the Receita Federal first. The Income Tax Department can disallow the treaty benefit and demand tax at domestic rates plus interest if the TRC is not on record at the time of payment.

Mistake 3: Ignoring the 2022 Protocol's Anti-Abuse Article

The 2022 amending protocol introduced a new Article 26-A combining a Principal Purpose Test (PPT) with Limitation of Benefits (LoB) elements. Brazilian entities routing transactions through shell structures without genuine economic substance may be denied treaty benefits under this provision.

Mistake 4: Applying the Old Royalties-Article Rate to Technical Service Fees

Before the 2022 protocol, the India-Brazil treaty had no separate FTS article, and technical/consultancy fees were taxed at the royalties rate (15%) or, absent a PE, not taxable in India as business profits under Article 7. Since the protocol, FTS has its own article — Article 12-A — at 10%. Continuing to apply the old 15% royalties-article rate (or the pre-protocol business-profits analysis) to FTS payments is now incorrect and can lead to over-deduction.

Mistake 5: Forgetting Form 15CA/15CB Requirements

Failing to file Form 15CA/15CB before remittance can result in penalties under Section 271-I (up to INR 1 lakh). The form must be filed electronically before the bank processes the outward remittance.

Mistake 6: Overlooking the Combined PPT/LoB Test in Article 26-A

The 2022 amending protocol's Article 26-A combines a Principal Purpose Test with Limitation of Benefits elements. Brazilian entities that lack genuine economic substance, or that were structured primarily to access treaty benefits, may be denied the reduced rates. Companies should ensure their Brazilian operations have real commercial purpose beyond tax optimization when claiming DTAA benefits on payments from India.

For end-to-end compliance support on cross-border payments between India and Brazil, contact Beacon Filing's team of chartered accountants and tax advisors.

Frequently Asked Questions

What is the withholding tax rate on dividends paid from India to Brazil?

Since the 2022 amending protocol took effect, the DTAA rate on dividends is 10% for a Brazilian company beneficial owner holding directly at least 20% of the Indian company's capital throughout a 365-day period including the payment date, and 15% in all other cases. Both rates are a saving compared to the domestic rate of 20%.

Why did the India-Brazil treaty have a 25% rate on trademark royalties?

The original 1988 treaty set a uniquely high 25% rate on trademark royalties, so taxpayers historically applied the more beneficial domestic rate under Section 90(2). The 2022 amending protocol lowered the trademark rate to 15%, which is now the current, in-force rate — and is itself more beneficial than the domestic 20% rate. Other (non-trademark) royalties are taxed at 10% under the revised treaty.

Does the MLI affect the India-Brazil DTAA?

No. Brazil has not signed the OECD Multilateral Instrument, so the India-Brazil DTAA is governed only by its original text and the 2022 amending protocol. Anti-abuse measures come from the treaty's own Article 26-A (PPT/LoB) provision rather than the MLI.

Is there a separate FTS provision in the India-Brazil treaty?

Yes, since the 2022 amending protocol. The original 1988 treaty had no separate article for fees for technical services — such fees were covered under Article 12 (royalties) at 15%, or treated as business profits under Article 7 if no PE existed in India. The revised treaty adds a standalone FTS article, Article 12-A, taxing fees for technical services at 10% of the gross amount.

Can I apply for a nil withholding certificate under the India-Brazil DTAA?

Yes. Under Section 197 of the Income Tax Act, the payee (the Brazilian recipient) applies to the Assessing Officer for a certificate authorizing lower or nil withholding if the actual tax liability is expected to be nil or lower. The Indian payer cannot apply under Section 197; the payer's own route is an application under Section 195(2).

What happens if the Indian payer deducts tax at a higher rate than the DTAA rate?

The Brazilian recipient can file an income tax return in India claiming a refund of the excess tax deducted. Alternatively, the Brazilian resident can claim the Indian tax paid as a foreign tax credit in Brazil, subject to Brazilian credit limits, to avoid double taxation.