The Brazilian Federal Revenue Service (Receita Federal do Brasil — RFB) has revised a position that, for more than five years, burdened the cash flow of Brazilian companies providing services to foreign customers. Through Cosit Tax Ruling (Solução de Consulta) No. 139, dated August 10, 2026, released on August 11, 2026, the RFB now accepts that the income tax withheld in the customer’s country on revenues from services rendered directly to foreign customers may be credited against the Corporate Income Tax (IRPJ) calculated for that month’s estimated payment, in the same month in which the revenues are recognized and taxed. The ruling expressly revises Cosit Tax Ruling No. 18, dated March 18, 2021, under which the credit could be claimed only in the year-end tax computation.
The change affects Brazilian companies taxed under the annual Lucro Real (actual-profit) regime that pay IRPJ and the Social Contribution on Net Profit (CSLL) through monthly estimated payments and earn service revenues directly from foreign customers, a common scenario in technology, engineering, telecommunications, and corporate services provided to multinational groups. Under the previous guidance, those companies taxed the revenue month by month but could claim the foreign tax credit only at year-end.
The main aspects of the new ruling are examined below.
What Did the Previous Guidance Establish?
In interpreting Article 26 of Law No. 9,249 of December 26, 1995, Cosit Tax Ruling No. 18/2021 held that the right to claim the tax paid abroad arose only “upon the determination of taxable income in the balance sheet drawn up on December 31” (free translation). In practice, revenue from services rendered directly to foreign customers entered the tax base for the monthly estimated payments as soon as it accrued, while the corresponding credit remained unavailable until the year-end tax computation.
That approach created a cash-flow timing disadvantage for taxpayers, effectively accelerating payments to the Brazilian Treasury: throughout the calendar year, companies paid estimates calculated on revenues already taxed abroad, without being able to offset the foreign tax.
What Changes Under Cosit Tax Ruling No. 139/2026?
The ruling was requested by a telecommunications company that provides satellite capacity to customers domiciled abroad, revenues subject to income tax withheld at source in the customer’s country. The case, however, extends beyond that industry: the reasoning reaches any services rendered directly to foreign customers.
The new guidance rests on a conceptual distinction. Revenues from services rendered directly to foreign customers, meaning revenues earned without the involvement of foreign branches, subsidiaries, or affiliates (Interpretative Ruling SRF No. 5, dated October 31, 2001), do not fall under Article 25 of Law No. 9,249/1995, which is reserved for profits, income, and capital gains taxed only in the December 31 balance sheet. Those revenues must be recognized on an accrual basis and taxed monthly through the estimated payments.
Cosit reasoned that, if the revenue is included in the tax base for that month’s estimated payment, the corresponding foreign tax credit should be available in that same month. In the words of the ruling, the tax withheld abroad may be “deducted in the same month in which the respective revenues are recognized and taxed” (free translation). Cosit Tax Ruling No. 139/2026 reached three conclusions:
- service revenues earned from foreign sources are included in the tax base for the monthly estimated IRPJ and CSLL payments in the month in which they are recognized;
- the tax paid abroad on those revenues may be credited against the IRPJ calculated for that month’s estimated payment, on the basis of Article 15 of Law No. 9,430 of December 27, 1996, combined with Article 26 of Law No. 9,249/1995;
- the foreign tax credit may not generate a negative IRPJ balance (saldo negativo), including for purposes of offset against other federal taxes administered by the RFB.
For the profits, income, and capital gains covered by Article 25 of Law No. 9,249/1995 (profits of foreign subsidiaries and affiliates, financial investments held abroad, among others), nothing changes: those items are taxed, and the foreign tax credit may still be claimed, only at year-end.
The new ruling corrects a significant mismatch in the prior guidance. There was no clear statutory basis for taxing the revenue monthly while postponing the corresponding foreign tax credit until year-end, as Cosit now acknowledges. In our view, the new ruling reaches the better reading of the statute. The correction, however, came late: between 2021 and 2026, service companies bore that cash-flow mismatch.
What Are the Requirements for Claiming the Foreign Tax Credit?
Cosit Tax Ruling No. 139/2026 changes the timing of the credit, not the requirements that must be met to claim it, which remain governed by Article 15 of Law No. 9,430/1996 and Article 26 of Law No. 9,249/1995. The main requirements are summarized below.
For companies, the credit does not depend on a double taxation treaty or on a reciprocity arrangement with the source country. The credit under Article 26 of Law No. 9,249/1995 is a unilateral double taxation relief mechanism granted by Brazilian domestic law itself; the reciprocity requirement applies only to individuals (Article 5 of Law No. 4,862 of November 29, 1965). If a treaty with the customer’s country exists, its provisions prevail over domestic law (Article 98 of the Brazilian National Tax Code — CTN) and may provide for a different method or specific conditions for eliminating double taxation, a scenario that warrants specific analysis.
The remaining requirements are as follows:
- taxation under the Lucro Real regime: Article 26 restricts the credit to tax levied on amounts computed under the Lucro Real regime. Companies under Brazil’s Lucro Presumido (deemed-profit) regime may not claim the credit, even where the service revenue was subject to withholding abroad, as consolidated in Solução de Divergência Cosit No. 8, of 2014, a ruling issued to resolve conflicting positions within the RFB;
- services rendered directly to foreign customers: the revenue may not derive from transactions carried out through foreign branches, subsidiaries, or affiliates (Interpretative Ruling SRF No. 5/2001). If a foreign affiliate or branch intermediates the transaction, the regime of Article 25 of Law No. 9,249/1995 applies, and both taxation and credit are concentrated in the year-end computation;
- matching of revenue and tax: to claim the credit, the taxpayer must show that the foreign tax was imposed on the same revenue included in the Brazilian tax base, taking into account the month-by-month matching now permitted by Cosit Tax Ruling No. 139/2026;
- quantitative limit: a taxpayer may claim the credit only up to the IRPJ, including the surtax, attributable to the corresponding foreign revenue, calculated in proportion to the total tax due (Article 26, § 1), and the credit may not generate a negative IRPJ balance, as detailed below;
- no double benefit through expense deduction: foreign tax claimed as a credit against IRPJ may not also be deducted as an expense for IRPJ and CSLL purposes. If the amount was recorded as an expense reducing net income, it must be added back to the tax bases before the credit is claimed, through adjustments in the e-Lalur and the e-Lacs within the Tax-Accounting Bookkeeping (ECF), as reflected in the RFB’s guidance for that filing. Claiming both the deduction and the credit would amount to a double and undue use of the same tax, subject to disallowance;
- documentary evidence: the document evidencing the tax paid abroad must be recognized by the foreign collecting authority and by the Brazilian Consulate in the country in which the tax is due (Article 26, § 2). Consular legalization is waived if the taxpayer demonstrates, through the payment document itself, that the law of the source country imposes the income tax that was paid (Article 16, § 2, II, of Law No. 9,430/1996). For documents issued in countries that are parties to the Hague Apostille Convention (Decree No. 8,660 of January 29, 2016), an apostille replaces consular legalization, as the Federal Administrative Tax Court (CARF) has recognized;
- currency conversion: the tax to be credited is converted into Brazilian reais at the selling exchange rate on the date of payment; if the currency has no quotation in Brazil, it is first converted into US dollars and then into reais (Article 26, § 3).
In practice, documentary evidence is the main point of friction in tax audits. Companies should keep organized files of the withholding statements issued by foreign customers and of the evidence of the applicable tax law in the source country, a requirement that becomes even more relevant with monthly crediting.
Does the Monthly Credit Also Apply to the CSLL?
No, not under Cosit Tax Ruling No. 139/2026. The ruling expressly allows the monthly foreign tax credit only against the IRPJ, on the basis of provisions that address the income tax (Article 15 of Law No. 9,430/1996 and Article 26 of Law No. 9,249/1995). The CSLL section of the ruling’s official summary merely confirms that service revenues from foreign sources must be included in the tax base for the monthly estimated CSLL payments.
The foreign tax credit may nevertheless affect the CSLL at year-end. Article 21 of Provisional Measure No. 2,158-35 of August 24, 2001 incorporates into the CSLL regime certain rules governing foreign income, including Articles 15 through 17 of Law No. 9,430/1996, a list that includes the provision governing the credit for direct service revenues. Its sole paragraph further permits foreign income tax that cannot be fully credited against the IRPJ to be applied against the CSLL attributable to the same foreign income, subject to the corresponding limit.
The mechanism is therefore sequential. The foreign tax first reduces the IRPJ, including the surtax, within the proportional limit of Article 26, § 1, of Law No. 9,249/1995. Only any excess foreign tax credit remaining after the IRPJ limitation may potentially be applied against the CSLL. Under the RFB’s current procedures, however, that second-stage use occurs in the year-end computation, not against monthly estimated payments.
For direct service revenues, applying the excess against the CSLL does involve some legal uncertainty. The sole paragraph of Article 21 refers to the inclusion of “profits earned abroad” (free translation), wording that may raise questions as to whether service revenues are covered, and Cosit Tax Ruling No. 139/2026 did not address the issue. In addition, the same amount may never be credited in full against the IRPJ and again against the CSLL: the statute provides for a single credit, used in two stages, with an overall ceiling that corresponds, as a rule, to the combined 34% burden levied in Brazil on the same revenues. Companies considering the second-stage use should assess the matter carefully in light of their specific circumstances, including whether a treaty with the source country exists. Where it does, Article 11 of Law No. 13,202 of December 8, 2015, an expressly interpretative provision, confirms that the double taxation treaties entered into by Brazil cover the CSLL.
What Limit Has the RFB Imposed?
This greater flexibility comes with an important limitation concerning the treatment of any negative IRPJ balance. If, at year-end, the tax due is not sufficient to absorb the foreign credit claimed in the estimates, the amount must be reversed and tracked in Part B of the e-Lalur, for use in subsequent periods. The credit never supports a claim for refund or reimbursement, nor an offset against other tax debts of the taxpayer.
The ruling illustrates the mechanics with a company whose IRPJ due on December 31 is BRL 2,500,000.00 and whose prepayments total BRL 3,400,000.00: BRL 3,000,000.00 actually paid through Federal Tax Payment Forms (DARFs) and BRL 400,000.00 in tax paid abroad. The negative IRPJ balance is only BRL 500,000.00, corresponding to the amounts actually paid in Brazil; the BRL 400,000.00 in foreign credit is carried to Part B of the e-Lalur.
At the operational level, companies must maintain auxiliary records identifying the composition of the negative balance and segregating the credits by origin. Companies should pay particular attention to the ECF filing, especially the Part B controls of the e-Lalur, and review the supporting calculations of the monthly estimated payments.
Cosit Tax Rulings are binding on the Federal Tax Administration and may be relied upon by taxpayers that follow the guidance they contain, pursuant to Article 33 of Normative Ruling RFB No. 2,058, dated December 9, 2021. Companies that had been following the previous guidance may reassess their calculation procedures immediately.
We remain available to discuss the practical implications of this new guidance for each company’s operations.
MILANEZ VILLELA ADVOGADOS