The list of new tax taxpayers includes the individuals domiciled in the country, the individuals or legal entities domiciled abroad, with respect to property held in the country, as well as the estate of the already mentioned individuals. The taxable basis for calculation will be the sum of the property and rights owned by the taxpayers and his dependents, excluding (i) the taxpayer´s debts; (ii) any lien on the taxpayer´s property and rights; (iii) the amounts effectively paid as Tax on Rural Property (Imposto sobre a propriedade Territorial Rural – ITR), Tax on Automotive Vehicles (Imposto sobre a Propriedade de Veículos Automotores – IPVA) and Tax on Urban Real State (Imposto sobre a propriedade Predial e Territorial Urbana – IPTU); (iv) any assets up to R$ 200.000,00 used in professional activities; and (v) any property the possession of which is considered highly relevant culturally, socially, economically or ecologically.
The property and rights will be assessed at their market value, according to the rules and criteria defined in the law. Until a future regulation is announced, however, the following rules will apply: I) In the case of real property and automotive vehicles, the taxable basis for calculation of the Tax on Rural Property (Imposto sobre a propriedade Territorial Rural – ITR), Tax on Automotive Vehicles (Imposto sobre a Propriedade de Veículos Automotores – IPVA), and Tax on Urban Real State (Imposto sobre a propriedade Predial e Territorial Urbana – IPTU) will be used; II) In the case of bonds and securities traded on stock, commodities, futures, and similar exchanges, or those kept in settlement and custody systems, the securities price on December 31 will be used; III) In the case of stocks or quotas of privately-held companies, the amount of the portion of the net equity, as calculated on December 31, corresponding to the shareholder´s or partner´s interest in the company´s capital stock will be used; IV) In the case of property and rights held abroad or denominated in foreign currency, the value of the property or rights on December 31st will be used; V) In the case of any other property and rights, the acquisition cost calculated according to the Income Tax rules will be used.
The draft also sets forth that the rates will be applied progressively, according to the following chart: Value of the property (R$) Rate Amount to be deducted (R$) From 5,520,000.01 to 9,039,000.00 0.55% 30,360.00 From 9,039,000.01 to 17,733,000.00 0.75% 48,438.00
From 17,733,000.01 to 27,876,000.00 1.00% 92,770.50 From 27,876,000.01 to 53,199,000.00 1.30% 176,398.50 From 53,199,000.01 to 115,851,000.00 1.65% 362,595.00 Above 115,851,000.01 1.80% 536,371.50
The draft allows for the deduction of up to 75% of any donations to research institutes, teaching establishments or foundations associated to state universities, provided that this does not decrease the payable contribution by an amount higher than one hundred thousand reais (R$ 100.000,00). Finally, the draft sets forth that the revenues collected in the prior financial year with the new tax will have to be used in health added by, at least, a percentage corresponding to the nominal variation of the Gross Domestic Product – GDP, in the year before the annual budget law. The draft is currently waiting for the appreciation of the committees of Social Security and Family, Finance and Taxing, and Constitution and Justice, and of Citizenship.
(Draft of Complementary Law No. 48/2011. Available at :<http://www.camara.gov.br/sileg/default.asp>. Access in: Aug. 2011)
PGFN/RFB The term for individuals to provide information to consolidate the REFIS IV was reinitiated
On June 27, 2011, PGFN/RFB Joint Administrative Ruling No. 05 was published setting a new deadline for individuals to provide information for the purposes of consolidating the term payment established by Law nº 11.941/2009 – REFIS IV. The term referred to in such Administrative Ruling is part of a time schedule to consolidate the REFIS IV as was initially established by Administrative Ruling PGFN/RFB No. 02/2011. According to Section 1 of PGFN/RFB Administrative Ruling No. 02/2011, in order to consolidate the debts included in the term payment program, the debtors have to provide certain information, such as, the debts to be paid cash or those object of a term payment, the payment bracket, the tax loss amounts and negative basis for calculation of the CSLL to be used, etc. (Section 9), on the dates set in advance by the ruling. In the case of individuals, it established that the information should have been given in the period from May 2nd to 25th, 2011 (art. 1, item III, line “a”, of PGFN/RFB Administrative Ruling No. 02/2011). However, according to the new Administrative Ruling a new time limit was set, and information may be provided in the period from August 10th to 31st, 2011. (PGFN/RFB Joint Administrative Ruling nº 05, June 27, 2011 / DOU-I, June 28, 2011)
LOCAL LEGISLATION/SP Decree No. 52.485, July 11th, 2011 – Most relevant aspects
With the publication of Decree No. 52.485/2011 the time limit to join the Term Payment Incentive Program (Programa de Parcelamento Incentivado – PPI) was reinitiated in the Municipality of São Paulo. Established by Law No 14.129, of January 11th, 2006, the local PPI aims at fostering the regularization of the City´s credits consequent of tax and non-tax debts, whether constituted or not, including those already listed for collection. The only debts that were excluded referred to any infringements to the traffic legislation; those of a contractual nature and those referring to indemnifications due to the City of São Paulo for damage caused to its property. With the new Decree, the PPI now covers the local credits concerning tax events that occurred until December 31st, 2009. The previous decree (Decree No. 51.362/2010) ensured joining the PPI only to the credits with tax events that had occurred before December 31st, 2006. In order to join the Program the debtor must request it or the administration may send a proposal. The taxpayer who chooses to join it must formalize his request by means of a specific application available at the electronic address of the city administration, by the limit date of August 31, 2011. The formalization of the request to join the PPI implies waiver of objections, defenses, appeals oradministrative claims discussing the debt and of any lawsuits or protests against any tax foreclosure. The Program contemplates quite attractive benefits.
In case the taxpayer chooses to pay the tax debts in a lump sum, a one hundred per cent (100%) deduction will be granted over the consolidated tax debt with respect to interest and seventy five per cent (75%) deduction of the fine and attorneys fees. Whereas if the option is for a term payment, the deduction will be of one hundred per cent (100%) of interest and fifty per cent (50%) of the fine and attorneys fees. In addition to the option for the payment in a lump sum, there is also the possibility of paying the debt in up to 12 monthly equal and successive installments, with 1% interest per month, adjusted according to the chart known as Price Table; or, further, in up to 120 monthly equal and successive installments, adjusted according to the SELIC rate. The Decree further establishes a minimum amount for each installment, which must respect a floor payment of fifty reais (R$50,00) for individuals and five hundred reais (R$ 500,00) for legal entities. Finally, the Decree further provides for the possibility of offsetting and deducting the debt against court bonds given as performance guarantees.
(Decree 52485, Jul. 11.2011 / DOCIDADE-SP, Jul. 12.2011)
STF The Federal Supreme Court applies precedent concerning use of the soil to telephone services providers
On March 15th, 2011, a panel decision was announced denying relief to the Regulatory Appeal filed by the Municipality of Rio de Janeiro against the decision that had granted relief to the Extraordinary Appeal submitted by the Brazilian Association of Competitive Telecommunications Services Providers (Associação Brasileira das Prestadoras de Serviços de Telecomunicações Competitivas – TELCOMP). The Municipality of Rio de Janeiro required a pecuniary compensation for the installation of the equipment items necessary to provide the public services in its territory; however its claim was dismissed in the single-judge decision of Extraordinary Appeal filed by TELCOMP.
When the Regulatory Appeal was judged by the Second Panel of the Federal Supreme Court, the Reviewing Justice, Ellen Gracie, judged that the same treatment given to electric power concessionaires was applicable to the telecommunications concessionaires, based on the opinion established by the Plenary Session of the Federal Supreme Court (STF) when judging Extraordinary Appeal nº 581.947/RO (with admitted general repercussion), to acknowledge the invasion, by the Municipality, into the legislative competence of the Federal Government with respect to the provision of telecommunications services (article 22, IV, of the Federal Constitution).
(Regulatory Appeal in Extraordinary Appeal 494163. Available at: <http://www.stf.jus.br/portal/principal/principal.asp>. Access in: Aug. 2011)
STF Federal Supreme Court acknowledges the existence of general repercussion of the discussion with respect to extending the charity entities immunity with respect to the PIS contribution
The Federal Supreme Court acknowledged the existence of general repercussion in the record of Extraordinary Appeal nº 636.941, which discusses whether the immunity granted to philanthropic entities, pursuant to article 195, § 7, of the Federal Constitution, covers the contributions to the PIS.
(Extraordinary Appeal 636941. Available at: <http://www.stf.jus.br/portal/principal/principal.asp>. Access in: Jul. 2011)
STF Federal Supreme Court judges cases regarding the Harmful Competition among the Brazilian States (so-called “Tax War”) in connection with the State of Rio de Janeiro
On June 29, 2011, panel decisions were published by the Federal Supreme Court in the record of the Direct Actions for
Unconstitutionality nº 2906/RJ and nº 3674/RJ, which deal with the Tax War. Direct Action for Unconstitutionality nº 2906/RJ was filed by the Governor of the State of São Paulo against a Law enacted by the State of Rio de Janeiro (State Law nº 3.394/2000) which granted the term payment of the debts and remission of interest and fine to the taxpayers who suffered the stay of tax advantages granted by a Law of the same nature, already declared unconstitutional by the Supreme Court (Law No. 2.273/1994). In this case, Reviewing Justice Marco Aurélio granted relief to the request, based on the opinion that the new Law not only violated the Federal Constitution, because the State of Rio de Janeiro established the tax benefit without a prior authorization by all the Brazilian States, but also it was deceiving the decision issued by the Federal Supreme Court. Direct Action for Unconstitutionality No. 3674/RJ, in turn, was filed by the Governor of the State of Rio Grande do Norte against a Law also issued by the State of Rio de Janeiro (State Law No. 4.181/2003), which provided for a reduction of the ICMS rate applicable to domestic operations with airplane coal oil, from 15% to 3%. Reviewing Justice Marco Aurélio granted relief to the request, on the grounds that State Law No. 4.181/2003 ensures a differentiated treatment to the domestic operations and that the arguments raised by the State of Rio de Janeiro – that the rate reduction aimed at fostering the industry and, further, would be part of a Government program aimed at eradicating poverty and reducing inequalities – would not be sufficient to justify the rate reduction without a prior authorization by all the Brazilian States.
(Direct Action for Unconstitutionality 2906; Direct Action for Unconstitutionality 3674. Available at: <http://www.stf.jus.br/portal/principal/principal.asp>. Access in: Jul. 2011)
STF STF judges Tax War cases in connection with the State of Rio de Janeiro
On July 1st, 2011, the panel decisions handed down by the Federal Supreme Court in the Record of Direct Actions for Unconstitutionality No. 2376/RJ and No. 4457/RJ were published, dealing with the Tax War. Direct Action for Unconstitutionality nº 2376/RJ was filed by the Governor of the State of Minas Gerais against Decree No. 26.005/2000, by means of which the State of Rio de Janeiro granted full tax relief in connection with the ICMS tax levied on domestic operations with inputs, materials, machines and equipment items to be used in oil platforms and vessels for rendering sea and navigation services. In this case, applicable to domestic operations with inputs, materials, machines and equipment items to be used in oil rigs and vessels used to provide sea and navigation services. In this case, Reviewing Justice Marco Aurélio granted relief to the request, based on the opinion that the Decree violated the Federal Constitution by granting benefits without a prior authorization by all the Brazilian States. Direct Action for Unconstitutionality nº 4457/RJ, in turn, was filed by the Governor of the State of Paraná against a Decree published by the State of Rio de Janeiro (Decree No. 42.241/2010), which granted tax benefits (reduced rate) in the events where the bus chassis production and body assembly took place in that state. Reviewing Justice Marco Aurélio granted relief to the request, on the grounds that Decree No. 42.241/2010 gives a differentiated tax treatment and that the argument raised by the State of Rio de Janeiro that the rate reduction aimed at the adequacy of the intercity urban transportation concessionaire fleet without burdening the users would not be sufficient to justify the granting of the benefit without a prior authorization by all the Brazilian States.
(Direct Action for Unconstitutionality ADI 4457; ADI 2376. Available at: <http://www.stf.jus.br/portal/principal/principal.asp>. Access in: Aug. 2011)
STJ Charging the ISS over check book supply services
On March 02nd, 2011, the panel decision was issued by the Second Panel of the Superior Court of Justice, granting partial relief to the Direct Appeal filed by the Taxpayer against the Municipality of Uberlândia – MG that planned to charge the ISS tax over the check book supply service provided “freely” by a financial institution.
At appeal level, the Court of Justice of the State of Minas Gerais had expressed opinion to the effect the free nature of the service would be irrelevant to the applicability of the ISS, concluding for the legitimacy of charging the tax. Contrarily, the Reviewing Justice of the Superior Court of Justice, Herman Benjamin, dismissed the opinion of the local court by stating that the effectively free services, as liberality, make it impossible to charge the ISS, according to case law of the Superior Court of Justice. It acknowledged, however, that the financial institutions do not provide services for free to their clients, and the Tax Authority is responsible for calculating the price for the service. Accordingly, partial relief was granted to the Direct Appeal
determining that the record should be returned to the Court “a quo” to determine the basis for calculation of the tax.
(Direct Appeal 1212026 - MG (2010/0156223-0) / DJe, 02.03.2011. Available at: <http://www.stj.gov.br/portal_stj/publicacao/engine.wsp>. Access in: Aug. 2011)
CARF Revenues from the sale of goods specifically to be exported are not subject to the PIS/Pasep. Active exchange variation is financial revenue and is subject to this contribution. The sale of scrap characterizes the sale of goods and is part of the company´s turnover
Panel Decision No. 3302 -00.642 of the 3rd Chamber of the Administrative Board of Tax Appeals (Câmara do Conselho Administrativo de Recursos Fiscais – CARF) was announced on July 20th, 2011, which determined that the revenues from sales carried out with specific exportation purposes are exempt from the contribution concerning the Social Integration Program (Programa de Integração Social – PIS/Pasep), when it is proved that the products were shipped directly from the industrial establishment to the proper export shipment or to bonded customs facilities, on the account and to the order of the exporting trade company. The decision also deemed as financial revenue the active exchange variation, as calculated on the date of (i) the contract settlement or (ii) monthly, according to the accrual system, subject to the imposition of the contribution; as chosen by the company, in the terms of art. 30 of Provisional Measure No. 2158-35, of 2001. Finally, the decision deemed that the goods classified as “scrap” are goods because they are movable things object of trade, and the scrap sales are an integral part of the selling company´s turnover.
(Panel decision No. 3302-00.642 – 3rd Chamber / 2nd Ordinary Panel)
CARF ICMS Tax Credit Assignment derived from an operation that took place before the exportation is not revenue for the purposes of the contribution to the PIS/Pasep
Panel Decision No. 3803 -00.773 of the 3rd Special Panel of the Administrative Board of Tax Appeals (3º Turma Especial do Conselho Administrativo de Recursos Fiscais – CARF) was published on July 26, 2011, and it determined that the assignment of the ICMS Tax credit originating from export operations, previously recorded as tax debts, is not the entry of new revenue and, therefore, is not subject to the imposition of the PIS. And when the tax is recovered, the company´s equity returns to the previous equity status, and such sum should not be considered as revenue, also in this case, for the purposes of the contribution to the PIS/Pasep.
(Panel Decision No. 3803-00.773 – 3rd Special Panel)
CARF Software resale without the font code delivery is a mercantile operation
On June 28, 2011, the 4th Chamber of the Administrative Board of Tax Appeals (Câmara do Conselho Administrativo de Recursos Fiscais – CARF) published decision No. 1402-00.404, which determined that the software resale without delivering the font code (technology transfer) is characterized as any other mercantile operation. It further stipulated that the payments made to the respective supplier whose contract is of license for use or sale/distribution, comprise the cost of the goods and are not considered as royalties for the purposes of application of the limits set forth in Law No. 4.506/64.
(Panel Decision No. 1402-00.404 – 4th Chamber / 2nd Panel)
CARF Initial term to constitute a tax credit derived from the obtainment of profit by a controlled company located abroad
On June 27, 2011 the 2nd Chamber of the 1st Section of the Administrative Board of Tax Appeals (Conselho Administrativo de Recursos Fiscais – CARF) published decision No. 1202-00.456, dealing with the statute of limitation for the Brazilian Revenue Service to constitute a tax credit of the Income Tax imposed on profits obtained abroad. The decision defined that the statute of limitation starts to run on the date when the profits originating from the controlled company located abroad are made available to the parent company located in Brazil, and not from the time when the foreign company obtains the profit. It also stipulated that in order to accomplish the offsetting of the amounts already paid as taxes abroad, it is necessary to fulfill the requirements provided in the applicable legislation.
(Panel Decision No. 1202-00.456 – 2nd Chamber / 2nd Panel)
CARF Non-applicability of the Withholding Income Tax as a consequence of an expropriation
On June 28, 2011, the 2nd Special Panel of the 2nd Section of the Administrative Board of Tax Appeals (Conselho Administrativo de Recursos Fiscais – CARF), published decision No 2802-00.293, which deals with the non-imposition of the Withholding Income Tax (Imposto de Renda Retido na Fonte – IRRF) on the amounts paid as expropriation carried out by the public authority. The decision stated that the expropriation is not equivalent to a disposal under remuneration, not being deemed, therefore, as capital gain, and, consequently, it cannot be taxed by the Income Tax.
(Panel Decision nº 2802-00.293 – 2nd Special Panel)
CARF The tax law has not conditioned the deductibility of the goodwill price to actual accrue of profit. It is not possible to apply CVM Instruction 247/96 for tax purposes
On June 28, 2011 the 4th Chamber of the 1st Section of the Administrative Board of Tax Appeals (Conselho Administrativo de Recursos Fiscais – CARF) published panel decision No. 1402-00.342, which established that the tax offense, when the legal nature of the goodwill price is analyzed, is limited to its economic grounds. In the case analyzed occurred an assessment of the assets according to the future profitability expectation. It was also stated that the tax legislation has not conditioned the deductibility of the goodwill price to the company actual accrue of profits, and did not establish either a time limit for accrual of the profit being discussed. Finally, it determined that CVM Instruction No. 247/96 cannot be applied for tax purposes.
(Panel Decision nº 1402-00.342 – 4th Chamber / 2nd Ordinary Panel)
8th TAX REGION Reducing capital – Tax effects
On June 30, 2011 Solution to Enquire No. 119 of the 2nd Tax Region was published, which determined the possibility of controlling the cost of shares received as bonus, as a result of the incorporation of profits or of the profit reserve of the invested company, in part B of the investing company´s Lalur, the real profit calculation book. In the case of a capital reduction, the amount returned to the shareholder may be calculated at the accounting or market value. If one chooses the accounting value, the cost of the shares originating from bonus payment must not affect the basis for calculation of the Corporate Income Tax (IRPJ) / Contribution over the Net Profit (CSLL). Moreover, the consultation determined that the delivery of rights to the shareholders at the accounting value cannot be compared to the disposal of assets.
(Enquire Solution No. 119, May 04, 2011 / DOU-I, Jun. 30, 2011)
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