(4.1.k) Interest
§133. Such as declares the Article 11, 4, of the Convention Brazil-Belgium:
“The term ‘interest’ used in this article is about the income of public funds, of loan obligations, whether or not accompanied of mortgage guarantees or of a clause of participation in profits, and credits of any nature, as well as other incomes that, by the tax legislation of the State that they came, are similar to the incomes of borrowed amounts. This term do not include the interest similar to dividends of the Article 10, paragraph 3, second phrase of the present Convention”
observing the following definition given in the Article 10, 3:
“The term ‘dividends’, used in this article, shall be understood as the incomes originated from the shares, rights of enjoyment, shares of mineral companies, shares of founder or other beneficiary parts excepting credits, as well as the incomes from other capital participations similar to the incomes of stocks by the fiscal legislation of the State where is resident the legal entity which distribute them. This term equally shall be understood as the incomes – even that were allocated in the form of interest – taxed by title of incomes of invested capital by the associated in the legal entities that are not a corporation, residents in Belgium”
§134. As example on the norms about interest, we can imagine a Brazilian company that loans to a Belgian company the X amount, with interest of Y% a.m. The Belgian company will pay the interest to the Brazilian company and will occurs taxation on the interest charged in Brazilian jurisdiciton, being possible to Belgium also taxing this fact until the limit of 15%. However, in the case a Private Bank have made a loan for the Belgian industry of an amount to be payed in 8 years, for the financing of machines which will compose their industrial complex in Belgium, then the Belgium can taxing the interest until the limit of 10%. And if the loan was made by the Brazilian Government to the Belgian company, then Belgium can not taxing the interest. And in case of relationship among the Brazilian and the Belgian companies, such as both be controlled by a third company, then the taxing on interest will be understood as taxing on net profit.
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