Portuguese
Why the U.S. Has No Tax Treaty with Brazil
An analysis of Prof. Yariv Brauner's 2011 paper — and what has changed since — exploring the political, technical, and strategic reasons behind one of international tax law's most notable gaps.
About the Paper
Author & Year
Prof. Yariv Brauner, 2011. Published in Direito Tributário Atual, No. 26.
Core Question
Why do the U.S. and Brazil — among each other's top 10 trading partners — have no bilateral tax treaty? A 1967 treaty was signed but never ratified by the U.S. Senate due to tax sparing clauses, and the agreement never entered into force.
Why the U.S. Signs Tax Treaties
Brauner identifies four core motivations driving U.S. treaty negotiations:
Prevent Double Taxation
Encourage cross-border trade and investment.
Combat Tax Evasion
Cooperation and information exchange between tax authorities.
Promote Global Standards
Advance residence and source-based taxation principles.
Protect Multinationals
Provide legal certainty and fiscal predictability for U.S. companies abroad.
The U.S. Treaty Ratification Process
Unlike Brazil, where individual clauses can be revoked without voiding the entire agreement, the U.S. Senate must accept or reject a treaty in full — a significant political barrier. Many Latin American countries, not just Brazil, lack treaties with the U.S. partly due to this rigidity.
Why a Treaty Would Benefit Both Nations
Democratic Stability
Brazil's moderate democracy and absence of ties to extremist regimes make it a reliable partner.
Corporate Interests
Companies operating in both countries face unnecessary tax burdens without a treaty framework.
Significant Economic Ties
The bilateral trade relationship is substantial, making the absence of a treaty an anomaly among major U.S. partners.
Key Obstacles to a Treaty
Brauner identifies multiple technical and political barriers that have blocked progress:
Tax Sparing
The U.S. feared Brazil would help American firms avoid taxes owed domestically, causing revenue loss for the IRS.
Transfer Pricing
Brazil's model diverged from the OECD standard, isolating it from most treaty partners and creating a major sticking point.
Distinct Tax Systems
Brazil is source-based and formalistic; the U.S. is residence-based — fundamentally different philosophies.
Mutual Distrust
The U.S. views Brazil's system as opaque and legally uncertain; Brazil resists surrendering withholding taxes on royalties and services.
Brauner's Critique of U.S. Tax Policy
What Brauner Criticizes
No clear objective in U.S. treaty policy
Failure to define benefits for its own taxpayers
Lack of coordination between fiscal and treaty policy
Failure to recognize the U.S. shift from capital exporter to importer
His Recommendation
The U.S. should be more flexible in negotiations, seeking balanced compromises with emerging economies rather than imposing rigid models. Meanwhile, Brazilian authorities have at times inadvertently facilitated tax avoidance by U.S. residents, while American investors cannot offset Brazilian taxes against U.S. liability.
U.S. vs. Brazil: Comparative Tax Framework
Growing Trade — Despite No Treaty
$40.3B
Record Exports
Brazilian exports to the U.S. in 2024 — a historic high.
78.3%
Industrial Share
Portion of 2024 exports represented by the industrial sector.
$80.9B
Total Trade Flow
Bilateral trade in 2024 — the second highest in the historical series.
Since 2011, U.S.-Brazil commercial ties have grown substantially, making the absence of a tax treaty an even more glaring anomaly.
The 2017 Tax Cuts and Jobs Act (TCJA)
The TCJA fundamentally reshaped U.S. international tax policy, reducing the incentive to negotiate new treaties:
1
Corporate Rate Cut
Federal corporate tax reduced from 35% to 21%, making the U.S. more attractive for investment.
2
Territorial System
Shift from worldwide to territorial taxation for corporations, mitigating many double-taxation scenarios.
3
GILTI Introduced
Tax on Global Intangible Low-Taxed Income: 10.5%–13.125% minimum on foreign earnings from intangibles.
4
BEAT Introduced
Base Erosion and Anti-Abuse Tax: minimum 10% on modified taxable income to prevent profit shifting.
BEAT: How It Works
What Is BEAT?
The Base Erosion and Anti-Abuse Tax imposes a minimum 10–12.5% rate on payments between related companies, limiting the effectiveness of treaties in reducing withholding taxes. It discourages treaty negotiations by capping benefits and often creating tax overlap even when a treaty is in force.
BEAT Calculation Example (USD millions)
GILTI: Closing the Intangible Tax Gap
The Problem
U.S. shareholders of Controlled Foreign Corporations (CFCs) were sheltering intellectual property — patents, trademarks, copyrights — in low-tax jurisdictions, creating a significant gap in U.S. tax revenue.
The Solution
GILTI imposes a 10.5%–13.125% minimum tax on foreign intangible income, neutralizing the advantage of relocating IP assets to favorable jurisdictions. This further entrenched U.S. unilateral fiscal protection, reducing the appeal of bilateral treaty negotiations.
Post-TCJA Treaty Activity: A Near Standstill
2010
U.S.–Chile treaty approved — but only entered into force in 2023, 13 years later.
2020
Brazil and U.S. sign a Trade Facilitation Agreement with tax-adjacent clauses — but no formal tax treaty.
2022
U.S. terminates its tax treaty with Hungary after Hungary blocked the OECD 15% global minimum tax in the EU.
2023
Croatia treaty signed — still awaiting Senate approval. Brazil–U.S. diplomatic momentum stalls.
Since the TCJA, the U.S. has effectively signed only one new treaty (Croatia), which remains unratified — confirming a near-complete freeze in treaty activity.
New Empirical Evidence: Do Treaties Even Help the U.S.?
Lee & Kim (2022)
Studying 78 countries from 2007–2018, the research found that double taxation treaties significantly boost Foreign Direct Investment (FDI) only for developing countries. For developed nations like the U.S., the FDI increase is a mere 1%. Brazil, as a developing country outside the OECD model, would gain far more from a treaty than the U.S. would.
What This Means
Diminishing U.S. Incentive
The economic case for the U.S. to negotiate is weaker than ever.
Brazil's Asymmetric Need
Brazil would benefit substantially — but has less leverage to compel negotiations.
Conclusion: A Treaty Further Away Than Ever
In 2011, Brauner saw the obstacles as more political than technical — surmountable with goodwill. Fourteen years later, the picture is bleaker.
TCJA Entrenched Unilateralism
GILTI and BEAT reduced U.S. dependence on treaties and hardened its fiscal self-protection posture.
Empirical Case Weakened
New research confirms treaties yield minimal FDI gains for developed countries like the U.S.
Diplomatic Momentum Stalled
The 2020 Trade Facilitation Agreement raised hopes, but since 2023 Brazil–U.S. economic integration efforts have reversed course.
Path Forward
A future treaty would require U.S. flexibility, Brazilian alignment with OECD standards, and a favorable political window — none of which appear imminent.

Key Takeaway: The absence of a U.S.–Brazil tax treaty is less a technical failure and more a strategic and political choice — one that continues to impose real costs on bilateral investment and competitiveness.