The amending protocol to the 1988 income tax treaty between Brazil and India was signed on 24 August 2022. The protocol is the second to amend the treaty and includes the following main changes:

• The preamble is replaced in line with OECD BEPS standards;
• Article 2 (Taxes Covered) is replaced with updated provisions, including that the treaty covers Brazilian federal income tax and Indian income tax including any surcharge thereon;
• Article 4 (Resident) is replaced with updated provisions, including that where a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated, which may be determined by the competent authorities through mutual agreement, and if no agreement is reached, such person shall not be entitled to any relief or exemption from tax provided by the treaty except to the extent and in such manner as may be agreed upon by the competent authorities;
• Article 5 (Permanent Establishment) is replaced with updated provisions, including that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting State through employees or other engaged personnel if the activities continue for a period or periods aggregating more than 183 days within any 12-month period;
• Article 10 (Dividends) is amended, including a 10% withholding tax rate if the beneficial owner is a company that has directly held at least 20% of the paying company's capital throughout a 365-day period that includes the day of the payment; otherwise, 15%;
• Article 11 (Interest) is amended, including a 10% withholding tax rate if the beneficial owner is a bank and the loan has been granted for at least five years for the financing of the purchase of equipment or of investment projects; otherwise, 15%;
• Article 12 (Royalties) is amended, including a 15% withholding tax rate on royalties paid for the use of or the right to use trademarks; otherwise, 10%;
• A new Article 12-A (Fees for Technical Services) is added, including a withholding tax rate of 10% on fees for technical services of a managerial, technical, or consultancy nature;
• Article 13 (Capital Gains) is replaced, including that the following capital gains derived by a resident of one Contracting State may be taxed by the other State:
  • gains from the alienation of immovable property situated in the other State;
  • gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • gains from the alienation of shares in a company that is a resident of the other State;
• Article 23 (Methods for the Elimination of Double Taxation) is replaced with updated provisions, with both contracting States continuing to apply the credit method for the elimination of double taxation;
• Article 25 (Mutual Agreement Procedure) is amended with regard to the time limit for a resident of either Contracting State to present a case, which is reduced from 5 years to 3 years from the first notification of the action resulting in taxation not in accordance with the provisions of the treaty;
• A new Article 26-A (Entitlement to Benefits) is added, which includes several provisions regarding a resident's entitlement to benefits under the treaty, including:
  • the provision that a resident of a Contracting State will only be entitled to the benefits of the treaty if the resident is a qualified person, although exceptions are provided where:
    • the resident of a Contracting State is engaged in the active conduct of a business in that State and the income derived from the other State emanates from, or is incidental to, that business, with certain excluded activity types;
    • at the time when the benefit would otherwise be accorded and on at least half of the days of any twelve-month period that includes that time, persons that are equivalent beneficiaries own, directly or indirectly, at least 75% of the shares of the resident (equivalent beneficiary generally means any person that would be entitled to an equivalent or more favorable benefit under the treaty or domestic law); or
    • the competent authority of the Contracting State in which the benefits would otherwise be denied is satisfied that neither the establishment, acquisition, or maintenance of a resident of the other State, nor the conduct of its operations, had as one of its principal purposes the obtaining of benefits under the treaty;
  • the provision that the benefits of the treaty will not apply to an item of income of an enterprise of a Contracting State derived from the other State if:
    • the first-mentioned State treats the income as attributable to a permanent establishment of the enterprise situated in a third jurisdiction;
    • the profits attributable to that permanent establishment are exempt from tax in the first-mentioned State; and
    • the tax imposed in the third jurisdiction on the income is less than the lower of 15% of the amount of that item of income and 60% of the tax that would be imposed in the first-mentioned State on that item of income if that permanent establishment were situated in the first-mentioned State;
  • a general anti-abuse provision, which provides that a benefit under the treaty will not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit would be in accordance with the object and purpose of the relevant provisions of the treaty;
• The final protocol to the treaty is replaced with various updated provisions, including:
  • the provision that interest for the purpose of Article 11 (Interest) includes interest paid as "interest on the company's equity" ("juros sobre o capital próprio") in accordance with Brazilian law; and
  • the provision that Article 12-A (Fees for Technical Services) covers payments of any kind received as consideration for the rendering of technical assistance.

Further to the above, the protocol also amends or replaces Article 1 (Personal Scope), Article 3 (General Definitions), Article 8 (Shipping and Air Transport), Article 14 (Independent Personal Services), Article 15 (Dependent Personal Services), Article 17 (Artistes and Sportspersons), Article 19 (Governmental Payments), and Article 24 (Non-Discrimination).

The protocol will enter into force 30 days after the ratification instruments are exchanged and will generally apply in Brazil from 1 January of the year following its entry into force and in India from 1 April of the year following its entry into force.