Brazilian tax authorities ("RFB") clarified today that, in relation to Austria, the inclusion in the so-called "gray list" – i.e., list of beneficial tax regimes, which implies in more severe rules of thin capitalization and deduction of expenses, and application of transfer pricing rules – will only apply to holding companies that do not perform "substantial economic activity", as it occurs with Denmark and the Netherlands.

Thus, Austrian companies that serve to hold participation in other companies, but with substantial economic activity, will be excluded from the Gray List.

Please note that, company with "substantial economic activity" is defined by Sole Paragraph to Art. 2nd of Normative Instruction no. 1,037/2010 as the one that has, "in its country of domicile, operational capacity appropriate to its means, evidenced, among other factors, by the existence of own qualified employees and in sufficient number and adequate facilities to performance of management and actual decision making process related to: I – development of activities aiming at obtaining income derived from its assets; or II – management of corporate participation aiming at obtaining income deriving from distribution of profits and capital gain."

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