Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 70-49

1970-1 C.B. 158

Sec. 901

IRS Headnote

The 25 percent tax imposed by Articles 292(1) and 298 of Brazilian Decree No. 58,400 of May 10, 1966, qualifies as an income tax for which credit is allowable against United States income tax.

Full Text

Rev. Rul. 70-49

Advice has been requested whether the 25 percent tax imposed by Articles 292(1) and 298 of Brazilian Decree No. 58,400 of May 10, 1966, is an income tax allowable as a credit against United States income tax in accordance with section 901 of the Internal Revenue Code of 1954.

Article 33 of the Decree provides, in pertinent part, that pursuant to Articles 292 to 300 of the Decree, income from sources located in Brazil accruing to natural persons or legal entities residing or domiciled abroad, or to foreign residents who remain in Brazil for less than 12 months, is subject to income tax when received.

Article 292(1) provides, in pertinent part, that income which is taxable under this Decree, when received by the individuals or legal entities referred to in Article 33, with certain exceptions, is subject to withholding of the tax at the source at the rate of 25 percent.

Article 298 provides that the tax rate under Article 292 shall fall upon gross income unless said gross income results from real estate in which case certain deductions are allowed.

The Brazilian tax is similar to the United States taxes imposed under sections 871 and 881 of the Code and withheld at source under sections 1441 and 1442 of the Code and, therefore, falls within the United States concept of an income tax.

Accordingly, it is held that the 25 percent tax imposed by Articles 292(1) and 298 of Brazilian Decree No. 58,400 of May 10, 1966, is an income tax allowable as a credit against United States income tax in accordance with section 901 of the Code.