811.512332 Shipping/20
The Brazilian Minister for Foreign Affairs ( Mangabeira ) to the American Ambassador in Brazil ( Morgan )
Mr. Ambassador: In continuation of the subject of my note No. NC/99, of September 28 last,37 and in accordance with information received from the Ministry of Finance, I have the honor to hand Your Excellency the following explanations:
The exemption mentioned in Article 6 of Law No. 5,623, of December 29, 1928, shall be applied to all companies or associations established in North America, which conduct the industry of navigation and have agencies or branch offices in Brazil or exercise activities here, under conditions of reciprocity for Brazilian navigation companies.
Under the express terms of the law, this privilege is restricted to these companies and therefore does not include the income of North American citizens, derived from the operation of one or more ships, registered under the laws of their country.38
Finally, I can inform Your Excellency that from December 29, 1928 onward, no taxes were collected on income derived by navigation companies operated by North American citizens or companies established in that country.
I avail myself [etc.]
- Not printed.↩
- By a despatch dated March 31, 1930, the American Ambassador at Rio de Janeiro informed the Secretary of State that he had been advised by the Brazilian Foreign Office that shareholders in foreign companies are required to pay the Brazilian income tax on their shares, the amount of the tax being collected before the interest thereon is paid them. This statement is construed by the Treasury Department to mean that the Brazilian Government imposes a tax on the shareholders of such corporations, but does not impose a tax on the income or profits of such corporations derived from the operation of ships documented under the laws of the United States. The Treasury Department understands that such provision of the Brazilian law is merely a method of collecting income tax at the source by means of requiring the tax to be paid by the corporations before the distribution of dividends on the shares of stock, which is similar to the provision contained in American law requiring income tax to be withheld at the source before the payment of bond interest or other fixed or determinable income of nonresident aliens as provided by section 144(b) of the Revenue Act of 1928.—Letter of the Secretary of the Treasury, July 28, 1930, to the Secretary of State (811.512332 Shipping/16, 17).↩