Law n. 12.441/11 changes the Civil Code to admit the incorporation of the limited liability individual company

Law nº 12.441/11 included Section 980-A in the Civil Code to admit the incorporation of the limited liability individual company. Until the change introduced by such law, the Civil Code included only the individual entrepreneur, whose personal property was mingled with that of the company. Besides, in the case of companies, the lack of plurality of partners not recovered within 180 days was a cause for its winding up.

Once the limited liability individual company is established, it will be possible to concentrate in only one person the title to the capital stock, which cannot be lower than 100 times the minimum wage in force.

To the corporate name will be added the expression “EIRELI”.

Since the rules of the limited liability company are applicable to the individual companies, according to Law nº 12.441/11, the liability of the sole “partner” will be limited to the capital stock, not mingled with his property.
(Law nº 12441, Jul 11.2011 / DOU-I, Jul. 12. 2011)

LEGISLATION Time limit to pay the IOF applicable in the period from July 27 to September 30 is extended

Treasury Ministry Administrative Ruling nº 370 was published on August 01, 2011 and extended to October 05 of this year, the time limit to pay the Tax on Financial Transactions (Imposto sobre Operações Financeiras – IOF) applicable to operations with derivatives, in connection with tax events that took place between July 07, 2011 and September 30, 2011.

With respect to the tax events that occurred after October 01, 2011, such Administrative Ruling provides that the IOF shall be collected by the 3rd business day subsequent to the ten-day period after it is assessed.

(Administrative Ruling MF nº 370, Jul. 29, 2011 / DOU-I, Aug. 01, 2011)

LEGISLATION IOF levies on the payment of bills with credit card

Interpretative Declaratory Act nº 40 of the of the Brazilian Revenue Service, published on August 02nd, explains that the use of the credit card to pay bills, in its charging function, is subject to the IOF.

The rate applicable to the credit operation for individuals is of 0.0082% (limited to 1.4965%) and for legal entities of 0.0041% (limited to 2.9930%). In both cases an additional rate of 0.38% applies.

(RFB Interpretative Declaratory Act nº 40, Aug. 01, 2011 / DOU-I, Aug. 02, 2011)

LEGISLATION Brazilian Revenue Service clarifies IOF levy on foreign loan operations, including intercompany loans

Declaratory Act nº 41 of the Brazilian Revenue Service was published last August 02, and provides for the levy of the IOF on exchange operations and for the calculation of the average term to foreign loan operations.

According to such Act, the IOF levies on the settlement of the exchange operations related to foreign loans, taken directly or by issuing securities in the international market with a minimum average term of up to 720 days, including with respect to the loan between associated companies, irrespective of the percentage of the capital stock held.

The Act also sets forth the formula to calculate the minimum average term for the loan operation:

In short, it is the weighted average of the amortization payments (“An”) of the principal (“P”), and the operation factor is the amortization term established for each of the payments (“dn”).

(RFB Interpretative Declaratory Act nº 41, Aug. 01, 2011 / DOU-I, Aug. 02, 2011)

RFB Brazilian Revenue Service changes the rule for the listing of assets with respect to termpayment debts

Brazilian Revenue Service Ruling Instruction nº 1.171/11, published in July of this year, changed the rule for the listing of assets to provide that the term-payment debts are computed in the sum of the tax credits for the listing purposes.

The listing of assets is a measure adopted by the Brazilian Revenue Service to monitor the taxpayer´s property in order to avoid its dilapidation. Thus, in the event the sum of tax credits exceeds, simultaneously, 30% of the taxpayer´s known assets and R$500.000,00, the Tax Authority must list the known assets of the taxpayer up to the amount that fulfills the tax credit for which he is liable.

Until publication of such rule, Ruling Instruction nº 1.088/10 was in effect, excluding the term-payment debts from the calculation of the tax credits when analyzing the need to list assets.

With the change brought by Ruling Instruction nº 1.171/11, the term-payment debts are included in that calculation, in such a way that the term debt inclusion does not decrease the tax credit that must be the object of the listing.

(RFB Ruling Instruction nº 1.171, Jul. 07, 2011 / DOU-I, Jul. 08, 2011)

LEGISLATION RFB Ruling Instruction nº 1.169/11 establishes a special procedure form customs control and revokes SRF Ruling Instruction nº 206/02

Ruling Instruction SRF nº 206/02 set the rules for the importation customs clearance. However, the Brazilian Revenue Service published Ruling Instruction nº 1.169/11 to revoke that Instruction and establish, on an exclusive basis, the customs control procedure which applies, this time, both to the importation and exportation operations, in case of suspicion of irregularities punishable by seizure penalty.

The procedure applies in the cases of suspicion of irregularity that may be punished with seizure penalty, irrespective of the customs clearance having started or been concluded. RFB Ruling Instruction nº 1.169/11 provides for the situations of irregularity that may indicate suspicion, comprising also the events of circumvention adopted to avoid the business law imposition.

In a brief summary, once the suspicions contemplated by the Administrative Ruling are identified, the Auditor of the Brazilian Revenue Service will adopt the measures necessary to confirm the existence of any irregularity, withholding the imported or exported goods until the procedure is finished, which must happen within 90 days, extended for an equal period.

If any illegal action is proved, a notice of infringement will be drawn up with the proposed application of the seizure penalty of the goods object of the operations under inspection.

(RFB Ruling Instruction nº 1.169, Jun. 29, 2011 / DOU-I, Jun. 30, 2011)

PGFN PGFN Opinion nº 492

The Attorney General Office of the Brazilian Treasury (Procuradoria Geral da Fazenda Nacional – PGFN) has recently issued Opinion nº 492, dealing with the consequences of the change in case law decisions of the Federal Supreme Court in connection with the res judicata in tax issues.

Specifically, the Opinion sets the guidelines to State Attorneys and taxpayers in the events in which a res judicata decision is contrary to a supervening definite decision of the STF.

In summary, PGFN Opinion nº 492 describes two main guidelines:

(i) if there is a definite precedent of the STF favorable to the Tax Authority, the latter may charge again the tax deemed unconstitutional in previous tax decision, already res judicata, with respect to the tax events taking place from then on, without the need to obtain prior court authorization to that effect; and (ii) if there is a definite precedent of the STF favorable to the taxpayer filing a suit as plaintiff, the latter may fail to pay the tax deemed constitutional in a prior tax decision that is res judicata, specifically with respect to tax events that take place from then on, without a prior court authorization being necessary to such effect.

Such Opinion is consequent of the Attorney Office manifestation, according to which “the objective and definitive precedents of the STF constitute a new juridical circumstance, that is able to cease, prospectively and automatically, the binding effect of prior decisions that are res judicata, in connection with the successive tax juridical relationships, which are contrary to them.”

(PGFN/CRJ Opinion nº 492, Mar. 30.2011 / DOU-I, 26.05.2011)

STF Direct Unconstitutionality Lawsuits judged by the STF with respect to the Tax War

On Aug. 01, 2011, panel decisions of the Federal Supreme Court were published in Direct Unconstitutionality Lawsuit (Ação Direta de Inconstitucionalidade - ADI) nº 3.794/PR and nº 3.413/RJ.

ADI nº 3.794 was filed by the Governor of the State of Paraná against Complementary Law nº 93/2001, of the State do Mato Grosso do Sul. Such Complementary Law established, without a prior ICMS Covenant, the granting of tax, extra-fiscal and financial-fiscal benefits to industrial enterprises, for a five-year term (article 6), consisting of the reduction of the outstanding ICMS debt (articles 7 and 8). ADI nº 3.794 was granted partial relief and the following articles were deemed unconstitutional: articles 7 and 8 and of part of article 6, specifically, the part concerning the granting of tax and financial-fiscal benefits.

ADI nº 3.413/RJ was filed by the Associação Brasileira da Indústria de Máquinas e Equipamentos – ABIMAQ against Law nº 4.163/2003 and Decree nº 35.011/2004, which governs it, both of the State do Rio de Janeiro. According to such legislation tax incentives were granted, without a prior ICMS Covenant, for the importation of sports equipment items with Olympic nature and for operations of domestic transactions with such equipment, provided that they are manufactured by industries located in the territory of the State of Rio de Janeiro; the benefit consisted of an ICMS rate reduction to zero. ADI nº 3.413/RJ was granted relief.

(ADI nº 3.794/PR; ADI nº 3.413/RJ. Available at:<http://www.stf.jus.br/portal/principal/principal.asp>. Access in: Aug. 2011)

STF STF acknowledges the unconstitutionality of the FUNRURAL payable by the individual rural producer based on the general repercussion system

During the session held on August 1st, 2011, the Federal Supreme Court judged Extraordinary Appeal nº 596.177, based on the general repercussion system. Such appeal discusses the unconstitutionality of article 25, Law nº 8.212/91, with the wording of Law nº 8.540/92, which provided for the contribution applicable to the sales of rural production of the employer who is a rural producer (individual) (FUNRURAL). The Reviewing Justice Ricardo Levandowski was of the opinion that there is identity between the issue being discussed and the issue decided in the records of Extraordinary Appeal nº 363.852 (known as the “Mataboi case”), reviewed by Justice Marco Aurélio, that concluded for the unconstitutionality of Law nº 8.540/92, based on the same grounds.

It is important to mention that, when judging RE nº 596.177, there was no statement about the constitutionality of the FUNRURAL as of the publication of Law nº 10.256/2001, but only with respect to the previous legislation (Law nº 8.540/92).

(Extraordinary Appeal nº 596.177. Available at: < http://www.stf.jus.br/portal/principal/principal.asp>. Access in: Aug. 2011)

STF STF acknowledges the IMPOSSIBILITY of the adoption BY THE JUDICIARY POWER of progressive income tax charts without a specific law

During the session held on Aug. 1st, 2011, the Federal Supreme Court denied relief to Extraordinary Appeal nº 388.312, filed by the Union of Employees of the Bank Establishments in the city of Belo Horizonte and region.

Represented by the Union, the employees claimed the adjustment of the Income Tax chart, beginning in 1996, so as to reflect the inflation indexes. This is so because in that year the application of the progressive rates began to take into account the income expressed in the Brazilian currency, and not in UFIRs, as it had occurred until that date. From then on, the Unions managed to adjust the wages by negotiating collectively and many workers who fit into the exemption bracket began to be taxed, or further, those already taxed moved to a higher bracket, with higher rates.

The opinion of Reviewing Justice Marco Aurélio failed to prevail, and the Plenary denied relief to the appeal, acknowledging the impossibility of the judiciary power adopting progressive Income Tax charts without a specific law, on the grounds that “the Judiciary could not enter into Government criteria of power, even though, in this case, one could be facing a partial unconstitutional omission capable of turning effective individualized juridical situations”.

(Extraordinary Appeal nº 388.312. Available at: < http://www.stf.jus.br/portal/principal/principal.asp>. Access on: Aug. 2011)

STF STF confirms position, now based on the system of general repercussion, with respect to the withholding due by services contractors

During the session held on August 1st, 2011, the Federal Supreme Court judged Extraordinary Appeal nº 603.191, based on the system of general repercussion.

Such appeal discusses the constitutionality of article 31, Law nº 8.212/91, which provides for the withholding of social security contribution due for services provided, at the rate of 11%, over the gross amount of the invoices.

The STF had already previously expressed opinion to the effect of the constitutionality of such provision; it is therefore a new confirmation of the position. What is new is that RE nº 603.191 was judged based on the system of general repercussion. According to such system, the opinion now announced by the STF will be applied to all the cases dealing with the same issue.
(Extraordinary Appeal nº 603.191. Available at: < http://www.stf.jus.br/portal/principal/principal.asp>. Access in: Aug. 2011)

STF

The STF will analyze the IPTU levy on public real estate assigned to a private company according to the general repercussion system

The STF has acknowledged the general repercussion of the discussion over the Tax on Urban Property (IPTU) levy on real estates owned by the Federation and assigned to a private company engaged in an economic activity (RE 601.720). In the actual case, a real estate assignment agreement was executed by Infraero and a vehicle dealer. In the records of the original lawsuit seeking annulment of the imposition, Justice in the State of Rio de Janeiro acknowledged the reciprocal tax immunity with respect to the IPTU assessment, on the grounds that the real estate belongs to the Federation and the company does not have dominium or possession of the property, in the terms of article 34 of the Brazilian Tax Code. The argument used by the Municipality to charge the tax is that the rule of reciprocal immunity does not apply to public real estate assigned to private entities engaged in economic activity which do not have public use. Additionally, the assignment agreement has an express clause determining that the dealer should pay the city taxes related to the property. The decision to be handed down by the STF will be applied to all other cases in connection with this issue.

(RE nº 601.720. Available at:<http://www.stf.jus.br/portal/principal/principal.asp>. Access in: Aug. 2011)

STF STF will analyze reserve of Complementary Law providing for passing the PIS and COFINS on to the consumer on the grounds of general repercussion

The STF acknowledged the general repercussion of the issue in connection with the necessity of enactment of a Complementary Law to define the possibility of the passing on, in telephone bills, of the PIS and COFINS to taxpayers using the telephone services, in the terms of article 146, item III, line a of the Federal Constitution (ARE 638.484). In the actual case, the appellant entered into a services agreement in connection with a telephone terminal and argues that he monthly suffers an illegal passing on of the PIS and COFINS over his bill. The argument used is that the basis for calculation of such contributions is the invoice amount and, therefore, the PIS and COFINS cannot be passed on to the consumer.
(ARE nº 638.484. Available at:<http://www.stf.jus.br/portal/principal/principal.asp>. Access in: Aug. 2011)

STF Complaint submitted by Eletrobras against decision that discusses the monetary correction over mandatory loan is dismissed by the STF

The STF dismissed the Complaint submitted by Eletrobras against an STJ decision that denied the processing of an Extraordinary Appeal to discuss the monetary correction in connection with the mandatory loan over electric power, established by Law nº 4.156/62 in order to fund the expansion and improvement of the electric industry. In order to reject the admission of the Extraordinary Appeal to the STF, the STJ Vice-President based the decision on the judgment of AI 735.933, in which Justice Gilmar Mendes decided that the issue should not receive the status of general repercussion. Eletrobras alleged that the controversy was not limited to the criteria of monetary adjustment of the mandatory loan, but to the authority of a partial body or court to declare or simply dismiss the applicability of a tax rule in the terms of Binding Decision nº 10 (plenary privilege, provided in article 97 of the Federal Constitution), invading the authority of the STF. It also argued that article 543-A of the Code of Civil Procedure is clear when it determines that the general repercussion must be acknowledged whenever the remedy objects decision contrary to a binding decision or prevailing case law of the court. Eletrobrás argues, therefore, for the acknowledgment of the applicability of Binding Decision nº 10, by reason of prevailing case law about the issue at the STF.
(Rcl nº 12.043. Available at: <http://www.stf.jus.br/portal/principal/principal.asp>. Access in: Aug. 2011)

STJ Refund of the Income Tax withheld from the payroll cannot be object of attachment

On August 04, 2011, a decision of the Fifth Panel of the Superior Court of Justice (STJ) was published in the records of Special Appeal nº 1.163.151/AC.

In a vote followed by the unanimity of the other members of the Panel, Reviewing Justice Adilson Vieira Macabu denied relief to the appeal filed by a real estate company against a panel decision of the Justice Court of the State of Acre, which decided that the credit in connection with the Income Tax refund could not be subject to attachment. To this same effect, the Reviewing Justice stated that the refund of the Income Tax withheld at source from the payroll is merely a refund of part of the wage withheld in excess. Accordingly, such amount has a wage nature and, in the terms of article 649, item IV, of the Code of Civil Procedure, it cannot be attached.

(REsp nº 1.163.151 - AC (2009/0211164-0). Available at: <http://www.stj.gov.br/portal_stj/publicacao/engine.wsp>. Access in: Aug. 2011)

STJ STJ will judge in August Special Appeals with tax nature under the system of repetitive appeals

The judgment of Direct Appeals nº 1.251.513 and nº 1.213.082, both dealing with tax issues, is scheduled for August 10, 2011.

REsp nº 1.251.513 deals with the possibility of the taxpayer paying debts using the reductions of Law nº 11.941/09 (REFIS IV) over court bonds bound to lawsuits that were res judicata before such law was enacted. It also discusses the possibility of applying the reductions of Law nº 11.941/09 over the amounts resulting from the application of SELIC Rate over the amount deposited into court.

The records of REsp nº 1.213.082 discusses the possibility of withholding amounts to be returned or reimbursed, when the taxpayer objects to the offsetting procedure ex officio. In the terms of article 73, Law nº 9.430/96, and article 7, of Decree-Law nº 2.287/86, such procedure takes place when, before proceeding to tax refund or reimbursement, the Brazilian Revenue Service checks whether the taxpayer is debtor of the Brazilian Treasury and offsets in full or in part the amount to be refunded or reimbursed with the debt amount.

Both REsp nº 1.251.513 and REsp nº 1.213.082 will be judged according to the system of repetitive appeals, that is, the opinion announced by the STJ in these cases will be applied to all the cases dealing with the same issue.

(REsp nº 1.251.513; REsp nº 1.213.082. Available at: <http://www.stj.gov.br/portal_stj/publicacao/engine.wsp>. Access in: Aug. 2011)

STJ Federation may request substitution of the attachment at any time

On May 25, 2011, a decision was handed down by the Second Panel of the Superior Court of Justice in the record of Special Appeal nº 1.163.553/RJ.

Originally, it is a tax foreclosure filed by the Federation against the company Telemar Norte Leste S.A., the debts of which were guaranteed by a bank guarantee. Notwithstanding, the Federation claimed for the substitution of the bank guarantee given as guarantee by the Debtor by an amount in cash to be used to distribute dividends to its shareholders.

Though the Debtor argued that the letter of guarantee and the amount in cash produce the same effects with respect to the guarantee of the debt and that the on line blocking could only take place in exceptional situations (different from the case under discussion, in which the offered bank guarantee exceeds the debt amount), the Panel denied relief to the REsp, based on the opinion that Federation may request, at any time, the substitution of the assets given as guarantee in the records of the tax foreclosure, specifically the substitution of bank guarantee by a cash amount, according to its convenience, without observing the provisions of article 11 of Law nº 6.830/80.

Once Reviewing Justice Castro Meira was defeated, Justice Herman Benjamin draw out the decision, based on a previous announcement of the STJ (in the record of EREsp nº 1.077.039), which stated that the letter of guarantee and the cash deposit do not have the same status, as well as on the opinion that the lower burden, provided in article 620, of the Code of Civil Procedure, must be analyzed according to the actual case.

(REsp nº 1.163.553 - RJ (2009/0212917-4). Available at: <http://www.stj.gov.br/portal_stj/publicacao/engine.wsp>. Access in: Aug. 2011)

STJ STJ authorizes the refusal of letter of guarantee with a determined validity term

According to a recent decision of the STJ, formal aspects of the letter of guarantee, such a determined validity term, are sufficient reasons to reject it as a guarantee of tax foreclosure (RESP 1.245.491). In the case under analysis, the company submitted a letter of guarantee with a validity term of three years and the Attorney Office of the Brazilian Treasury refused to accept the guarantee. The company, by means of a Special Appeal, presented the following arguments: violation of article 9, of Law n 6.830/80, that provides for the guarantees acceptable in a tax foreclosure; article 620, of the Code of Civil Procedure, by means of which the judge has always to choose the foreclosure means that is less burdensome to the debtor; and the non-existence of impediment to extend the letter of guarantee by addenda, at the discretion of the financial institution. Reviewing Justice Mauro Campbell Marques expressed opinion to the effect that the refusal of the Treasury was legitimate, because the systematic interpretation of the rules in force is that the creditor or the Judiciary may refuse the guarantee that does not have a validity term until the debtor´s obligations are extinguished. The Justice further emphasized that he does not reject the letter of guarantee as a means to guarantee the tax foreclosure; instead, he refuses only the non-compliance with the rules in force with respect to the formal aspects of the contract.

(REsp 1.245.491 - RJ (2011/0036818-2) / DJe: Jun. 29.2011. Available at:<http://www.stj.gov.br/portal_stj/publicacao/engine.wsp>. Access in: Aug. 2011)

STJ STJ upholds panel decision that determined the attachment of the company´s turnover

The STJ upheld panel decision, handed down by the Justice Court of the State of Santa Catarina, which determined the attachment of 3% of the monthly turnover of a company engaged in the oil distribution (RESP 1.130.972). Reviewing Justice Castro Meira emphasized that the case law of the Court is undisputable to the effect that, in exceptional cases, the attachment of the company´s turnover is admitted, provided that the debtor does not have assets or has insufficient assets to ensure the tax foreclosure. Additionally, the Justice emphasized that the percentage set for the attachment cannot make unfeasible the performance of the company´s business activity.

(REsp 1.130.972 - PR (2009/0058000-5) / DJe: Apr. 04, 2011. Available at: <http://www.stj.gov.br/portal_stj/publicacao/engine.wsp>. Access in: Aug. 2011)

TJSP Definitive decision makes null fine imposed on bank with respect to the ISS – Most relevant aspects

A bank, by means of a res judicata panel decision handed down by the 18th Chamber of Public Law, obtained the annulment of the tax assessments issued by the Municipality of São Paulo in view of the failure to pay the Tax on Services (Imposto sobre a Prestação de Serviços de Qualquer Natureza - ISSQN) applicable to certain bank operational revenues. The Court dismissed the levy of the tax on credit income resulting from an exporting contract, as well as from the reimbursement of charges and expenses, based on the opinion that they do not characterize the provision of bank services.

The discussion is a long lasting one and involves the possibility of taxing a list of services attached to Complementary Law 116/2003. The reality is that, in order to characterize the ISS applicability, the services must be included in such list. The opinion of the superior Courts is that, though the list of services contemplated in the Law is exhaustive, a broad and extensive interpretation is admitted.

According to the opinion of the Higher Court Judge Beatriz Braga, reviewer of the case, the service effectively provided must be in the list, irrespective of the nomenclature that is adopted, that is, extensive interpretation does not means expanding the list.

The panel decision set forth that the reimbursement referred to the expenses incurred by the Bank in the performance of its operations, which are identified, quantified and reimbursed by the clients by means of debit in their respective checking accounts. In this context, they can not be deemed service charges.

With respect to income from the exportation contract, the decision was that such income does not fit into any of the service codes presented by the Municipality, even considering an extensive interpretation.

The expectation is that the decision will become a precedent for various similar cases, and this understanding may also be applied to the granting of guarantees, such as the granting of bank guarantees and sureties.

(Appeal with Revision n° 994.09.010296-7. Available at: <https://esaj.tjsp.jus.br/esaj/portal.do?servico=740000>. Access in: Aug. 2011)

3rd TAX REGION REIDI – Revenue from the sale of goods and services to qualified and co-qualified companies

On July 29, 2011, the 3rd Tax Region published Solution to Enquiry nº 17. In the case of REIDI, it clarified that the revenue from the sales and services to a legal entity qualified or co-qualified in the REIDI, proved by authentic documents and carried out with the suspension of the PIS and COFINS, are not computed in the basis for calculation of the PIS and COFINS, irrespective of the calculation method to which the selling legal entity is subject.
(Solution to Enquiry nº 17, 28.07.2011 / DOU-I, Jul. 29, 2011

4th TAX REGION PIS and COFINS credits regarding expenses with customs clearance

On July 29, 2011, the 4th Tax Region published Solution to Enquiry nº 72. Such solution expressed opinion to the effect that the expenses with the customs clearance of goods imported directly for reselling does not entitle the company to PIS and COFINS credits under the non-cumulative system, in view of the fact that such credit right applies, exclusively, to goods and services acquired from a legal entity domiciled in the Country.
(Solution to Enquiry nº 72, Jul. 21, 2011 / DOU-I, Jul. 29, 2011

4th TAX REGION My Home My Life Program – Benefits do not apply

On July 29, 2011, Solution to Enquiry nº 73 was published by the 4th Tax Region. Such solution expressed opinion to the effect that, within the scope of the My Home My Life Program, the tax benefits provided in article 4, §§ 2 and 3, and 12 of RFB Ruling Instruction nº 934, with respect to the unified payment of taxes equivalent to 1% of the monthly revenue obtained with the construction contract in developments submitted to the Special Taxation System Regime, do not apply to the suppliers of materials and services subcontracted by a developer or construction company.
(Solution to Enquiry nº 73, Jul. 27, 2011 / DOU-I, Jul. 29, 2011

6th TAX REGION Refund of capital and amounts received by court decision

On Jun. 14, 2011, Solution to Enquiry nº 48 was published by the 6th Tax Region. Such Solution deals with three distinct issues: (i) refunding capital, (ii) taxation of interest and monetary adjustment of amounts received by virtue of a court decision, and (iii) deduction of expenses with court expert examination. With respect to the first issue, the solution expressed opinion to the effect that the positive difference between the amount returned and the one spent to pay up the capital stock characterizes a capital gain and, therefore, is taxable. However, if the amount refunded by virtue of a court decision corresponds to the originally paid up amount, the refunding of the historical value of the capital does not characterize a gain.

With respect to the second issue, the solution to enquiry expressed opinion to the effect that the amounts received, by virtue of a court decision, in connection with late-payment interest and monetary adjustment, subsequent to January 1st, 1996, are taxable at source.

Finally, with respect to the third issue, the solution to enquiry expressed opinion to the effect that the procedural costs and expenses with expert examination, provided that they are proved by authentic documentation, may be deducted, in case the amounts are received as a consequence of a court decision.

(Solution to Enquiry nº 48, Jun. 13, 2011 / DOU-I, Jun. 14, 2011)

6th TAX REGION Equal approach to domestic and customs cleared products

On June 17, 2011, Solution to Enquire nº 51 was published, dealing with the applicability of the suspension the IPI taxation, in connection with the Manaus Free Zone and the West Amazon, on customs cleared products. The solution sets forth that, as a rule, the IPI suspension contemplates domestic products, understanding as such the products resulting from manufacturing operations carried out in Brazil. It extends, however, such approach to the foreign products that are customs cleared and resold by the importer which have as their destination the Manaus Free Zone and West Amazon, when they are imported from countries that, based on an international agreement or convention, have ensured an equal treatment to the imported and domestic product.

(Solution to Enquiry nº 51, Jun. 15, 2011 / DOU-I, Jun. 17, 2011)

6th TAX REGION Taxation of patches of cloth and scrap from the textile industry

On Jun. 17, 2011 Solution to Enquire nº 52 of the 6th Tax Region was published. Such solution determines that the revenues from the sale of what is left over (patches of cloth and scrap) from the production process of the textile industries are subject to applicability of the PIS and COFINS.

(Solution to Enquire nº 52, Jun. 15, 2011 / DOU-I, Jun. 17, 2011)

6th TAX REGION REIDI – suspension of the PIS and COFINS

On June 17, 2011, Solution to Enquiry nº 53, of the 6th Tax Region was published. Dealing with the suspension of the PIS and COFINS within the scope of the REIDI, the solution establishes the following points: (i)in order for the suspension to be guaranteed, the ones taking the services and not the services providers must obtain the qualification or co-qualification; (ii) the suspension does not encompass the taxes due by the legal entities subcontracted by the services providers; and (iii) the suspension of such contributions encompasses only the services acquired after the qualification or co-qualification of the ones taking the services.

(Solution to Enquiry nº 53, Jun. 15, 2011 / DOU-I, Jun. 17, 2011)

6th TAX REGION Non applicability of the PIS and COFINS – Exporting Companies

On Jun. 17, 2011, Solution to Enquiry nº 56 of the 6th Tax Region was published. Such solution sets forth that the non-applicability of the PIS and COFINS to revenues from the exportation of goods and sales to Exporting Companies with specific exporting purposes, encompasses the Exporting Commercial Companies (ECEs), which may or may not have a trading company status, according to Decree-Law N 1.248/72. They are, however, subject to registration with the RFB and to enrollment with the Registry of the Exporters and Importers of the SECEX.

(Solution to Enquiry nº 56, Jun. 16.2011 / DOU-I, Jun. 17.2011)

6th TAX REGION Applicability of the IRRF and CIDE to financial and administrative consulting services

On July 8, 2011, Solution to Enquiry nº 65 of the 6th Tax Region was published. Such solution set forth that the financial and administrative consulting services are characterized as administrative and similar assistance, therefore subject to applicability of the CIDE at the rate of 10% and to the IRRF at a 15% rate. If the income is received from a resident in a country with most favorable taxation, such income will be subject to applicability of the IRRF at a 25% rate, irrespective of the existence of technology transfer.

(Solution to Enquiry nº 65, Jul. 06. 2011 / DOU-I, Jul. 08, 2011)

7th TAX REGION

Disposal of Corporate Interest – Non Residents

On June 22, 2011, Solution to Enquiry nº 51, of the 7th Tax Region was published. It deals with the IRRF when disposing of corporate interest in case the acquirer and the seller are non-residents, and sets forth that the capital gain corresponds to the positive difference between the amount of the disposal and the acquisition cost, when the latter may be evidenced. If this is not possible, the acquisition cost must be calculated based on the capital registered with the BACEN or equal to zero.

(Solution to Enquiry nº 51, May 24, 2011 / DOU-I, Jun. 22.2011)

7th TAX REGION Remittance abroad – Subscription of Publications – News Supply on the Internet

On June 22, 2011, Solution to Enquiry nº 52, of the 7th Tax Region was published. Such Solution expressed opinion to the effect that the remittances abroad in compliance with the commitment to contribute to the foreign entity is subject to the IRRF. However, there is no applicability of the IRRF to remittances abroad to pay for the acquisition of magazines and publications, supplied by subscription, by residents and those domiciled abroad. Such non-applicability does not encompass the payment for the supply of selected news or news prepared to order, according to specific requirements of the user, supplied on the internet.

(Solution to Enquiry nº 52, May 23, 2011 / DOU-I, Jun. 22, 2011)

7th TAX REGION Calculation of the CSLL PIS and COFINS withholding by a parent or affiliated company

On June 22, 2011, Solution to Enquiry nº 53 was published by the 7th Tax Region. It deals with the withholding of the PIS, COFINS and CSLL, within the scope of article 30, Law 10.833/2003, and sets forth that the withholding limit provided therein must be observed considering the sum of the payments made to the parent company and affiliates, of a same legal entity, altogether, and not separately.

(Solution to Enquiry nº 53, May 25, 2011 / DOU-I, Jun. 22.2011)

8th TAX REGION PIS and COFINS Credit - Inputs

On July 26, 2011, Solution to Enquiry nº 143 was published by the 8th Tax Region. Such Solution, dealing with the PIS and COFINS credit, sets forth that the term input cannot be considered as all and any goods or services that produces essential expense to the company, but only those effectively applied or consumed in the production of the goods to be sold or provided as services. Accordingly, the expenses with telephone services, as necessary as they may be, do not entitle the company to IS and COFINS credits, because they do not fit into the legal definition of inputs.

(Solution to Enquiry nº 143, Jun. 21, 2011 / DOU-I, Jul. 26.2011)

9th TAX REGION Taxation of Emerging Damage and Loss of Profit

On July 8, 2011, Solution to Enquiry nº 137 was published by the 9th Tax Region. Within the scope of the IRPJ and the CSLL, such Solution set forth that the amounts received as emerging damage are not subject to such taxes, except if the expenses object of the indemnification are computed when calculating the Real Profit of the same period or of periods prior to the receipt. However, the loss of profit is subject to the applicability of the taxes, without any exceptions.

(Solution to Enquiry nº 137, Jun. 07, 2011 / DOU-I, Jul. 08, 2011

10th TAX REGION

Transfer Pricing – back to back credits

On July 11, 2011 Solution to Enquiry nº 2 was published by the 10th Tax Region. After analyzing the operations described by the enquiring taxpayer as “back to back credits”, it set forth that such operations are subject to the transfer pricing legislation. Since the operation that was described involves two purchase and sale operations, both with associated companies, it must be demonstrated, in accordance to the transfer pricing legislation, that the profit margin of the whole transaction does not differ from the margin that would be applied if the operations had occurred between independent companies. Thus, two parameter prices must be calculated, one for the purchase operation and another for the selling operation, observing the legal restrictions for each calculating method.

(Solution to Enquire nº 2, Jul. 01. 2011 / DOU-I, Jul. 11.2011)