24 de october de 2025

Double Taxation Agreement between Brazil and Portugal: How does it work?

The double taxation agreement between Brazil and Portugal aims to assist companies and individuals investing in both countries.

However, some questions always arise, especially when there is a lack of complete knowledge about the agreement between these two countries.

With this in mind, as a lawyer specializing in Tax and International Law, as well as Social Security, I decided to write a text that answers the main questions on the subject.

After all, advance information can avoid headaches, unpleasant surprises, and tax rights that can go unnoticed.

Stay with me to learn more!

If you would like legal assistance from our team, send us a message on WhatsApp.

What is double taxation?

Double taxation occurs when the same income, profit, or assets of an individual or company are taxed more than once.

It manifests itself in two main forms:

Internal double taxation: more than one level of government within the same country (e.g., federal and state) taxes the same item;
International double taxation: This is the most common and the main focus of debate. It occurs when two different countries exercise their power to tax the same income.

Therefore, double taxation is when the same money is taxed twice, and Double Taxation Agreements are a fundamental tool to ensure this doesn’t happen, promoting fairness and tax predictability for those operating in more than one country.

But I’ll go into more detail later. Stay with me!

What determines double taxation?

Double taxation is primarily determined by the overlapping tax jurisdictions of two or more countries on the same income or assets.

In legal terms, it requires the simultaneous occurrence of two factors:

1. Identical Taxable Event:

The first and essential factor is that the same income, profit, or asset (the “taxable event”) is subject to taxation in multiple jurisdictions;
Wages, dividends, interest, company profits, the value of real estate, etc., are taxed.

2. Plurality and Conflict of Rules (Connecting Criteria):

This is the factor that causes overlap. Countries define their tax laws (rules) based on different connecting criteria to assert their right to tax. Double taxation arises when there is a conflict between these criteria.

The two main criteria that lead to conflict and, consequently, double taxation are:

3. Residence Criterion (personal/subjective connection):

The country taxes its resident (individual or company) on all of their worldwide income, regardless of where the income was earned;
The principle: called universal taxation or the residence principle.

Example: If you are a tax resident in Brazil, Brazil has the right to tax you on profits you earned from shares on a stock exchange in Portugal.

4. Source Criterion (real/objective connection):

The country taxes all income generated within its territory, regardless of who received it (resident or non-resident);
The principle: called taxation at source or the territoriality principle.

Example: Portugal, where the stock was sold (the source of the income), also has the right to tax that same profit, even if you are not a resident there.

The so-called Collision is where double taxation occurs when one country uses the Residence Criterion to tax the worldwide income of its resident, and the other country uses the Source Criterion to tax the same income generated in its territory.

What are the impacts of double taxation?

Double taxation has severe and predominantly negative impacts on both companies and individuals, acting as a real barrier to the economy and international development.

The most immediate and drastic effect is the financial burden. For example:

Reduced Profit Margin: Paying taxes twice on the same income drastically reduces net profit. For a company, this means that a much larger portion of revenue is consumed by taxes;
Loss of Competitiveness: Companies subject to double taxation see their products and services become more expensive, as the tax cost is built into the price. This puts them at a disadvantage in the global market compared to competitors operating in countries with double taxation agreements;
Burden on Foreign Investment (FDI): Double taxation is a major disincentive to Foreign Direct Investment. Capital is naturally attracted to where legal certainty and profitability are greater. The uncertainty and additional costs of double taxation deter investments that would generate jobs and development.

Furthermore, disputes over which country has the right to tax introduce a high degree of legal uncertainty and bureaucracy.

High Compliance Costs: Individuals and companies operating internationally must invest in specialized legal and tax planning and advice simply to avoid or mitigate double taxation. This is a significant operational cost.
Tax Disputes and Litigation: The absence of a clear agreement or divergent interpretations of the laws (especially when there is no
Double Taxation Agreement (DTA): can lead to lengthy and costly legal or administrative disputes with the tax authorities of both countries.
Planning Uncertainty: Multinational companies rely on stable tax rules to plan long-term operations. The threat of double taxation prevents this planning from being done with certainty.

Now, for the individual, double taxation directly affects income and life decisions:

Reduced Net Income: An individual who works abroad or receives a pension from another country may have a significant portion of their income consumed by double taxes, negating the benefits of working or investing outside their country of residence;
Disincentive to Mobility: The risk of paying taxes twice can discourage qualified professionals and expatriates from accepting international positions, limiting the circulation of talent and global professional growth;
Personal Complexity: Filing two income tax returns (one in each country), with complex exchange rate and tax offset rules, makes managing personal finances a heavy burden.

In other words, double taxation is considered an evil to be combated in International Tax Law.

It ultimately undermines the fundamental principle of taxable capacity (collecting taxes fairly, without confiscation) and creates artificial obstacles to the free flow of capital and people, essential to a globalized economy.

How to avoid double taxation?

You can avoid double taxation, but it’s a process that generally requires attention to the law and, often, professional support from a specialized attorney.

Taxpayers have the right not to be charged twice and can use the law to their advantage.

For companies, good tax planning is the best way to prevent this. The goal is to analyze all the company’s operations and anticipate potential conflicts of jurisdiction between taxing entities.

With the help of an accounting professional or tax attorney, you can organize your activities to reduce the risk of double taxation.

Double taxation typically occurs due to differing interpretations of the law. Having an expert in the field is essential to identify the problem and guide the taxpayer.

They can analyze the case, determine which federal entity has jurisdiction to collect the tax, and prepare a defense.

Does Portugal have a double taxation agreement with Brazil?

Yes, Brazil and Portugal have a Double Taxation Agreement (DTA) in force.

The main objective of the double taxation agreement with Brazil is to establish clear rules for the taxation of income earned by residents of one country in the other. This ensures that:

Income tax is not levied twice on the same taxable event (avoiding double taxation);
There is cooperation between the tax authorities of both countries to prevent tax evasion.

Furthermore, the agreement benefits:

Individuals: Brazilians residing in Portugal (or vice versa) who receive salaries, pensions, or have investments in the other country;
Companies: Brazilian companies with operations or branches (permanent establishments) in Portugal (or vice versa);
Investors: Individuals who invest in stocks, funds, or real estate in the other country and receive dividends, interest, rent, or capital gains.

Remember that to understand the specific details regarding the taxation of a particular type of income, it is essential to seek the advice of an expert in International Tax Law.

What is Decree No. 4,012 of November 13, 2001?

Decree No. 4,012/2001 has been fully in force since November 13, 2001, replacing a previous agreement from 1971.

The agreement currently in effect is the “Convention between the Federative Republic of Brazil and the Portuguese Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income.”

Which countries have a double taxation agreement with Brazil?

Currently, Brazil has double taxation agreements with several countries, both in Latin America and Europe.

In Latin America, these are:

Argentina:

The agreement prevents double taxation on income taxes, being an important instrument for bilateral economic relations.

Venezuela:

The convention aims to avoid double taxation on income and prevent tax evasion, promoting economic exchange.

Uruguay:

The agreement eliminates double taxation on income, which is essential for companies and investors operating in both countries.

Chile:

The agreement updates the rules to prevent double taxation and tax evasion, favoring reciprocal investment and tax cooperation.

Mexico:

The agreement prevents companies and individuals from being taxed twice on the same income, which is essential for trade relations between the two countries.

Peru:

The agreement prevents double taxation on income taxes, being a relevant instrument for bilateral trade and investment relations.

Ecuador:

The agreement, although under discussion, aims to cooperate to prevent double taxation and tax evasion, similar to other treaties already in force.

In Europe, some of the countries that have agreements with Brazil are:

Italy:

The convention establishes that taxes paid in one country can be offset in the other, which benefits investors and reduces the tax burden.

Germany:

It defines rules to avoid double taxation and prevent tax evasion, being crucial for trade and investment between the two countries.

Switzerland:

The agreement seeks to eliminate double taxation on income taxes, being essential for the flow of investment between Brazil and Switzerland.

Russia:

The agreement aims to avoid double taxation on income taxes and prevent tax evasion.

Sweden:

The agreement is one of Brazil’s oldest and aims to avoid double taxation on profits, wages, and other income.

Luxembourg:

The agreement seeks to avoid double taxation on income and capital, providing a safer environment for the flow of investments.

Netherlands:

The agreement is essential to avoid double taxation on corporate profits and wages, simplifying transactions for investors and expatriates.

France:

The agreement provides for tax offsetting between the countries, which benefits multinational companies, investors, and expatriates, ensuring legal certainty.

Portugal:

The agreement is important to avoid double taxation on income, which benefits the large flow of people and investments between the two countries.

Belgium:

The agreement establishes rules for the taxation of wages, profits, and other income, being essential for those with economic ties in both countries.

Spain:

The treaty prevents double taxation on capital gains, dividends, interest, and wages, being essential for companies and workers.

Finland:

The agreement, currently in the approval phase, aims to regulate air services and other types of income, ensuring a more favorable environment for companies in both countries.

Slovakia:

The agreement seeks to eliminate double taxation and prevent tax evasion, promoting a more favorable environment for bilateral trade.

Czech Republic:

The treaty aims to eliminate double taxation, boosting investment and economic cooperation between the two countries.

Austria:

It allows companies and individuals to avoid paying taxes twice on the same income, encouraging business between Brazil and Austria.

There are also agreements with other countries, such as China, Singapore, Turkey, the United Kingdom, Colombia, South Korea, and Japan.

It’s worth noting that the agreement with Colombia is not yet finalized; it is still in process. Some European countries, such as Norway, Hungary, and Denmark, are also involved.

Conclusion

There you go! Now you know how the double taxation agreement between Brazil and Portugal works, covering both individuals and legal entities.

The most important legal advice I can give you is: pay attention to the agreement mentioned, especially considering the type of investment you are about to make or have already begun to consider.

Having accurate information and knowing exactly what the rules of the agreement between the two countries are will help you avoid any unpleasant problems and financial losses.

If you still have questions, I recommend seeking the assistance of a lawyer specializing in the subject, who can carefully analyze your specific situation, focusing on key points.

After all, losing rights and money is never a good choice.