Brazil Lower Level Federal Court Finds CFC Legislation Unconstitutional

On 16 May 2016, the Lower Level Federal Judicial Court of Curitiba issued a decision holding that the provisions of Art. 76 of Law 12.973/2014, which contain the Brazilian CFC rules, are unconstitutional. Under the rules, Brazilian companies must add a pro rata share of the profits of their foreign CFCs to their taxable income as on 31 December of the relevant fiscal year, regardless of any actual distribution of profits from the CFC.

The plaintiff in the case submitted that the application …