Bilateral Business Environment

New regulation from the Federal Revenue Service removes tax hurdles and signals Brazil’s alignment with international tax practices.

In April 2025, Brazil’s Federal Revenue Service (Receita Federal do Brasil) published Normative Instruction RFB No. 2,265, significantly altering the country's approach to jurisdictions previously considered to have favorable tax regimes. Among the most notable changes is the removal of the United Arab Emirates (UAE) from Brazil’s list of Low-Tax Jurisdictions (LTJs), a move that will have immediate effects on business operations, investment attractiveness, and fiscal dynamics between the two countries.

This decision marks a regulatory milestone and brings Brazil closer to international best practices by recognizing the UAE’s progress in tax governance, fiscal transparency, and the fight against tax evasion. At the same time, the measure removes barriers that had previously increased costs or hindered the operations of Brazilian companies in the UAE and vice versa.

Regulatory Advancements and Technical Adjustments

The new Normative Instruction introduces four key changes:

• Removal of the UAE from the LTJ list: The UAE will no longer be treated as a jurisdiction subject to punitive tax measures under Brazilian law, eliminating the automatic presumption of tax evasion in transactions involving the country.
• Update of the Privileged Tax Regimes (PTRs) list: Brazil has also removed the regime applicable to holding companies with no substantial economic activity in Austria, aligning with OECD guidelines.
• Reduction of the minimum income tax rate: Article 1 of the new rule sets a minimum income tax rate of 17%—down from the previous 20%—in accordance with the legal framework established by Law No. 14,596/2023.
• Maintenance of transparency standards: The definition of LTJs continues to include the lack of access to information on ultimate beneficial owners as an exclusion criterion, reinforcing international standards of traceability and tax compliance.

Direct Impacts on Brazil–UAE Relations

• The removal of the UAE from the LTJ list will have tangible and immediate effects on business activities. Key impacts include:
• Elimination of thin capitalization restrictions, which previously limited the deductibility of interest payments to related parties in LTJs;
• Removal of the increased 25% Withholding Income Tax (WHT) on certain types of income and capital gains paid to UAE residents;
• Greater legal certainty for structuring international operations that use the UAE as a holding jurisdiction and/or operational hub—especially relevant for industries such as logistics, energy, agribusiness, aviation, and infrastructure.

Impact on the Business Environment

The measure has been positively received by private sector representatives, who view it as a strategic and necessary correction to enhance economic integration between Brazil and the Emirates.

“The removal of the UAE from the LTJ list opens the door to a more predictable and efficient business environment, particularly from a tax perspective. It’s a mature decision that acknowledges the institutional and fiscal solidity of the Emirates,” says Paulo Rage, partner at Mayer Brown and member of LIDE Emirates.

Rodrigo Paiva, President of LIDE Emirates, underscores the symbolic nature of the move by the Brazilian government: “This regulatory update marks a new chapter in bilateral relations. The removal of tax barriers creates fertile ground for new investment flows and business cooperation. The expectation is for mutual growth, with major projects underway and new agreements on the horizon.”

A Signal to Investors and the Global Market

The decision also strengthens Brazil’s commitment to adapting its tax system to international governance standards. In an era of increasing regulatory scrutiny and global compliance demands, the reassessment of tax jurisdictions can no longer rely on outdated or unilateral criteria.

With the UAE no longer on the LTJ list, the country consolidates its role as a legitimate international business hub for Brazilian multinationals. At the same time, Brazil demonstrates strategic awareness in recognizing this new global context. The measure has the potential to energize joint ventures, logistics operations, and corporate structures involving the two economies—which are complementary across various sectors.

Conclusion

The publication of Normative Instruction RFB No. 2,265/2025 is more than just a technical update—it is a political and economic signal. By removing the United Arab Emirates from its list of tax havens, Brazil takes a significant step toward repositioning its tax policy in the international arena and paving the way for a new phase of investment and cooperation with one of the most strategic economies in the Middle East—and the world.