On June 16, 2014, Brazilian Tax Authorities enacted Normative Expository (“ADE”) Act No. 5, which revoked the ADE No. 1/2000. The ADE No. 1/2000 provided for the application of withholding tax in Brazil to payments of service fees to overseas, regardless of the existence of a Tax Treaty to Avoid Double Taxation (‘Tax Treaty”)

The new ADE determines that outbound payments of service fees to beneficiaries located in treaty countries in connection with technical services or technical assistance will be performed in accordance with the Tax Treaty, as follows (i) treated as royalties in case of a Protocol providing for the same treatment to technical services and technical assistance for purposes of the application of withholding tax, (ii) independent professions, or professional services, or independent professionals, in cases the technical services or technical assistance performed are related to the technical qualification of a person or group of persons ; or (iii) in all other cases, as business profit.

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