Optional regime concerning tax reduction on payroll and increase of rates of Social Security Contribution on Gross Revenue

On August 31st, 2015, Law No. 13,161 was enacted. Among other provisions, this law brings relevant amendments to the tax reduction on the payroll set forth in Law No. 12,546/2011. This new law makes optional the collection of social security contribution on gross revenue (Contribuição Previdenciária sobre a Receita Bruta - CPRB) for companies already subject to that regime.

This contribution may now be replaced for the social security contribution in charge of the employer (Contribuição Previdenciária Patronal - CPP), established by Law No. 8,212/91. The option shall be made through the payment of the contribution imposed on the gross revenue of January of each year or to the first subsequent period with gross revenue, and shall remain the same throughout the year. Specifically for 2015, the option for CPRB shall be made through the payment of the contribution imposed on gross revenue of November, 2015, or to the first subsequent period with gross revenue, and shall also remain the same for the rest of the year.

This Law also establishes that, for companies that pay simultaneously the contributions established in sections 7 and 8 of Law No. 12,546/2011, the option shall be valid for both contributions and the company will be forbidden from making the option concerning only one of them. Specifically concerning companies that develop civil construction activities, the option shall be made per civil work, made through the payment of the contribution imposed on the gross revenue of the registration on CEI or to the subsequent period with gross revenue in the work, and shall remain the same until it ends. In turn, the amount of contribution due by companies that develop activities or manufacture products subject to different rates on gross revenue shall be calculated by means of applying the respective rate to the gross revenue related to each activity or product.

Another relevant amendment concerns the increase of CPRB’s rates, which shall be effective as of December 1st, 2015. Law No. 13,161/2015 increases from 2% to 4.5% the rate for companies framed under article 7 of Law No. 12,546/2011, except for call center companies, collective transportation of passengers,

train and metro transportation of passengers, set forth in items I, III, V and VI of the same section, which had the rate increased from 2% to 3%. In turn, companies listed in section 8 of Law No. 12,546/2011 shall be subject to an increase of CPRB’s rate from 1% to 2.5%, except for the companies listed in item II to IX and XIII to XVI of section 8, paragraph 3.

Companies that manufacture products classified in codes 6309.00 (textile products, shows, hats and similar products, used), 64.01 to 64.06 (shoes) and 87.02 (transportation), except for 8702.90.10 (trolleybus) of Tipi become subject to the rate of 1.5%. In turn, companies that manufacture products based on meat, fish and bread classified in Tipi codes 02.03, 0206.30.00, 0206.4, 02.07, 02.09, 02.10.1, 0210.99.00, 03.03, 03.04, 0504.00, 05.05, 1601.00.00, 16.02, 1901.20.00 Ex 01, 1905.90.90 Ex 01 and 03.02, except for 0302.90.00), shall pay the contribution at a 1% rate. The law also provides that ongoing civil construction works, subject to CPRB at a 2% rate under section 7 of Law No. 12,546/2011 (prior wording), shall remain subject to the same rate until the end of the work, in accordance with criteria established by law.

Finally, Law No. 13,161/15 revoked the special customs regime to import packages set forth in sections 52 to 54 of Law No. 11,196/05 and brings several specific amendments to Law No. 12,780/13, which provides for tax measures related to the Olympic and Paralympic Games of 2016. (Law No. 13,161, 08.31.2015, DOU-I, 08.31.2015. Available on: <http://www.planalto.gov.br/ccivil_03/_Ato2015-2018/2015/Lei/L13161.htm>. Access: September, 2015).

FEDERAL LEGISLATION Provisory Law changes taxation of wine and spirits and on earnings derived from image rights and revokes the benefit on the revenue derived from the sale of informatics products Provisory Law No. 690, of August 31st, 2015, dealt with three different matters: (i) IPI on wine and spirits, (ii) Income Tax on image right and (iii) revoked tax benefits within the scope of Digital Inclusion Program.

The IPI imposed on wine, whisky, cachaça and liquors, among others, shall levy based on ad valorem rates (percentage rates). This Provisory Law also established that the distributor related to the producer/importer shall be deemed as an industrial taxpayer.

This Provisory Law also revoked the legal provisions that reduced the rates of PIS/Pasep and Cofins imposed on the revenue of retail sales of informatics products, such as desktop computers, notebooks, tablets, smartphones, modems and routers.

Finally, the Provisory Law amended rules on the taxation of author and image rights, aiming to disencourage individuals that hold these rights to seek taxation as legal entities.

(Provisory Law No. 690, 08.31.2015, DOU-I, 08.31.2015 – extra issue. Available on: <http://www.planalto.gov.br/CCIVIL_03/_Ato2015-2018/2015/Mpv/mpv690.htm>. Access: September, 2015).

Bill to Amend the Constitution aims to impose ICMS on goods imported under lease agreements On August 5th, 2015, Bill to Amend the Constitution No. 107/2015 (“PEC No. 107/2015”) was presented to the Federal Senate. This Bill aims to amend the wording of letter ‘a’ of item IX of paragraph 2 of section 155 of the Constitution in order to allow the imposition of ICMS on goods imported under leasing with or without subsequent transfer of ownership. (Bill to Amend the Constitution No. 107, 2015. Available on: <http://legis.senado.leg.br/mateweb/servlet/PDFMateServlet?m=122575&s=http://www.senado.leg.br/atividade/materia /MateFO.xsl&o=ASC&o2=A&a=0>. Access: September, 2015). IRS Income Tax on earnings received in the financial market IRS Ruling No. 1,585, of August 31st, 2015 consolidates rules regarding Income Tax imposed on earnings received in financial and capital markets and brings some innovations. This Ruling revoked Ruling No. 1,022/2010, which was out-of-date and had suffered amendments and inclusions since its enactment.

Among the modifications brought by that IRS Ruling, we may highlight three innovations not provided by the legislation.

The first innovation concerns the taxation of investments in funds regarding shares of residents or domiciled in Brazil. In accordance with current rules, the manager of the fund or investment club is responsible for withholding/collecting Income Tax upon the distribution of dividends, Interest on Net Equity, reimbursement of loan or other earnings derived from financial assets in its portfolio, attributable to each shareholder.

The second main innovation deals with investments in fixed or variable income bonds or securities of residents or domiciled in Brazil. In this scenario, this Ruling regulated the imposition of Income Tax on earnings received under Certificates of Structured Transactions (Certificados de Operações Estruturadas - COE).

Finally, this Ruling also regulated the taxation of earnings derived from investments in funds and in fixed or

variable income bonds or securities by residents and domiciled abroad. These cases are subject to a special regime with reduced rates, except for investors residing or domiciled in tax havens. Notice that the reduced taxation was kept for sovereign funds, even when the investor resides or is domiciled in tax havens, provided that the requirements set forth in the IRS Ruling are duly complied with.

(IRS Ruling No. 1,585, 08.31.2015, DOU-I, 09.02.2015. Available on: <http://normas.receita.fazenda.gov.br/sijut2consulta/link.action?idAto=67494&visao=anotado>. Access: September, 2015).

IRS Payment of loan of financial resources in installments and moment of imposition of Withholding Income Tax The Internal Revenue Service published COSIT Answer to Inquiry No. 205/2015, which analyzed the moment of imposition and the rate of WHT on the loan of financial resources in which the payment of the main amount and interest is made in installments.

In accordance with IRS’s guidance, the income tax shall be imposed on interests comprised by each installment upon its payment. Thus, the specific tax rate among the ones established by section 1 of Law no. 11,033/20014 shall be determined considering the period between the date when the resource was made available by the lender and the date of payment of interest. (Answer to Inquiry IRS No. 205, 08.05.2015, DOU-I, 08.14.2015).