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Abstract
On March 28 2011 the Brazilian government changed the Tax on Financial Operations (IOF) rate that is levied on foreign loan transactions (intercompany loans between a foreign entity and a Brazilian entity). On April 6, 2011 the rules were subsequently amended setting forth that as of April 7 2011, the applicable IOF tax rate on foreign currency exchange transactions related to loans with an average payment term of up to 720 days (as opposed to 360 days) and subject to registration at the Brazilian Central Bank is increased to 6%. With the issuance of Declaratory Act 1/2000, the Brazilian tax authorities expressly stated their position in the sense that income derived from technical services (not involving transfer of technology) should be subject to taxation in Brazil based on the provisions stated under domestic legislation, even though the foreign company does not have a permanent establishment in the country.