Brazil Clarifies Deduction of Foreign Taxes Paid by CFCs

The Brazilian Federal Revenue Service (RFB) has issued Interpretative Declaratory Act RFB No. 1 of 22 January 2026 (the Act), which clarifies the allowed deduction of foreign tax paid by a Brazilian company's controlled or affiliated entities abroad (i.e., CFCs), when calculating corporate income tax (IRPJ) and social contribution on net profit (CSLL). The Act clarifies that foreign taxes may only reduce the Brazilian tax due on profits recognized through the equity method adjustment of inve…