INTEREST ON EQUITY: NATURE OF THE INCOME IN LIGHT OF DOUBLE TAX TREATIES

Abstract

The present article aims to study the nature of the Interest on Equity (Juros sobre o Capital Próprio – IOE) for the purpose of application of Double Tax Treaties (DTTs) signed by Brazil. The IOE is known for carrying characteristics both of distributed profits as of interest. Given the schedular structure of these treaties, the hybrid nature of this type of income turns up into a challenge of qualification inside their provisions. This is the issue that this work faces. To this end, the nature of the IOE for purposes of internal and international tax law, with attention being given to the OECD Model and its influence over the Brazilian international tax policy. At last, a framework exercise of this kind of income is carried out in the pro-visions of each DTT signed by Brazil; taking into account confrontations of the issue held by the Brazilian Federal Revenue Service and by national and foreign case-law.