WORLDWIDE TAXATION WITH TERRITORIAL EFFECTS? THE DEEMED-PAID FOREIGN TAX CREDIT OF LAW NO. 12,973/2014

Abstract

The present study aims to analyze the economic effects of the deemed-paid foreign tax credit established by paragraph 10 of art. 87 of Law no. 12,973/2014. The hypothesis tested is that the use of such deemed-paid foreign tax credit has, as a rule, pure territoriality effect. For this purpose, one will explain the worldwide criterion, the economic justification underlying its adoption, the method used to prevent double taxation, as well as a bird’s-eye view of the regime under Law no. 12,973/2014. Subsequently, one will examine the technical category of the deemed-paid credit, its application by Law no. 12,973/2014 and the economic effects of the use of the deemed-paid foreign tax credit. One will conclude that, in the majority of the 92 jurisdictions analyzed, the granting of deemed-paid foreign tax credit for investees located therein will have, as a rule, exemption effects and, therefore, pure territoriality effect.