Case Law Note: The Brazilian Case Law on the Single Tax Principle: A Case of Tax Treaty Override

Abstract

This article analyses the recent decision handed down by the Brazilian High Court of Appeals whereby the single tax principle and the abuse of law principle were applied in order to ultimately deny treaty benefits in the context of double tax conventions that provided for neither the entitlement to benefits clause nor the updated terminology of the title and preamble. Accordingly, since both principles could be deemed as general principles of law (therefore, part of the international law) comparable to double taxation conventions (DTC) provisions, lower level courts were allowed to condition treaty benefits to the demonstration that the taxpayer had complied with those principles. Therefore, in the case of potential hybrid mismatches, the absence of double non taxation for treaty benefits entitlement should be demonstrated. This article contends that this precedent must be reviewed. Firstly, the precedent disregards how international rules are created and how DTCs are interpreted. Secondly, it creates legal uncertainty in the context of DTCs. Ultimately, the precedent shall cause hermeneutic override whereby a state overrides a treaty with the pretext of interpreting treaty provisions. Single Tax Principle, Double Non-Taxation, Brazilian High Court of Appeals, Hybrid Mismatches.q