The 1st panel of the 4th Chamber of the 1st Section of the Administrative Council for Tax Appeals (CARF) maintained the collection of Income Tax (IRRF) on amounts paid by Arcos Dorados (Golden Arcs) in Brazil, a franchise that manages McDonald’s in Latin America. However, the company claims to be sharing accounting, finance and HR, and therefore, the amounts should not be taxed.
The decision relates to remittances made to affiliates abroad by shared services that benefited the Brazilian company. The final decision was by a casting vote and a deciding vote by the Panel’s Chairman.
“This matter is far from being resolved, with few decisions under CARF’s scope of authority. Nevertheless, the thesis is extremely pertinent to multinationals with establishments in other countries that share certain costs, since, by the decision, taxpayers may be subject to the collection of IRRF on remittances made as reimbursement of expenses, even though such amounts do not represent income or increase, but mere reimbursement”, explains Bruno Zaroni, founding partner of Zaroni Advogados.