Brazil: IOF Applicability To Operations With Derivatives

Last Updated: 4 March 2013
Article by Machado Meyer

RFB Normative Instruction nº 1.271/2012 ("IN 1.271") was published on May 22, 2012, to amend RFB Normative Instruction nº 1.207/11 ("IN 1.207/11"), and govern the IOF applicability to operations with derivatives.

IN 1.271 establishes that the transfer of a position in financial derivatives between investment funds, consequent of merger operations, does not produce any effects for the purposes of applicability of the tax.

It also established a zero rate for operations with derivatives to cover risks inherent to the foreign currency price difference, consequent of exportation contracts executed by an individual or legal entity resident or domiciled in the Country.

(Ruling Instruction RFB nº 1.271, May 22, 2012).

RFB

Transfer Price in importation and exportation operations

Normative Opinion nº 01, of the Brazilian Revenue Service, was published on May 08, 2012, in an attempt to clarify the application of the transfer price rules in importation and exportation operations, carried out by companies in Brazil with associated companies abroad, in the periods related to fiscal years 2009 and 2010.

The objective of the Opinion was to clarify the applicability of the Resale Price Method Margins, "PRL 20" and "PRL 60", since in December 2009: (i) MP nº 472/09, by means of art. 61, revoked art. 2 of Law nº 9.959/00, which inserted item II to art. 18 of Law nº 9.430/96, in order to admit the application of different pre-set profit margins for the purposes of calculating the PRL method (20% and 60%); (ii) MP nº 476/09 revoked art. 61 of MP nº 472/09; (iii) MP nº 478/09 reaffirmed the purpose of the Administration to eliminate what MP nº 472/09, had revoked, expressly establishing the effect of art. 2, of Law nº 9.959/00 and establishing the new calculation method (PVL 35); (iv) Provisional Measures nºs 476/09 and 478/09 were not converted into law, losing their effect in one hundred and twenty (120) days after the dates they were published, and; (v) MP nº 472/09 was converted into Law n.º 12.249/10, with suppression of its article 61, which revoked the provision that admitted applicability of the PRL 20 and PRL 60 methods.

According to the Brazilian Federal Revenue opinion, the Resale Price less Profit method (Preço de Revenda Menos Lucro - PRL), with a profit margin of 20% or 60%, may be applied to the calendar years of 2009 and 2010. For the period from January 1st to May 31st, 2010, the Selling Price less Profit (Preço de Venda Menos Lucro - PVL) may be applied, with a 35% profit margin, as provided in Provisional Measure nº 478/2009, in the events where such method is more favorable to the taxpayers.

(Ruling Opinion RFB nº 01, May 08, 2012).

LEGISLATION

Brazilian Depositary Receipts are relieved from the IOF

The rates related to the Tax on Financial Operations (Imposto sobre Operações Financeiras - IOF) applicable to exchange operations in connection with the issue of Brazilian Depositary Receipts ("BDR") have been reduced to zero. The issue of such securities, backed by the value of shares traded on stock exchanges abroad, was subject to the general rule of the tax, which resulted in the combined taxation of the tax at 6.38% over the value of the securities, the issue of which involves two exchange operations.

(Decree nº 7.683, Feb. 29, 2012 / DOU-I, Mar. 01, 2012).

LEGISLATION

Other changes introduced by Provisional Measure nº 563, of April 3, 2012

Extension of the benefit of rate reduction of the social security contribution provided in article 22, items I and II, of Law nº 8.212/91 (article 44 of Provisional Measure 563 and changes of Law nº 11.774/08)

Such Provisional Measure changed the wording of §5, article 14, of Law nº 11.774/08, to extend the rate reduction benefit of the social security contribution provided in article 22, items I and III, of Law nº 8.212/91, represented by the subtraction of 1/10 of the percentage corresponding to the ratio between the gross sales revenue of services to the foreign market and the total gross revenue of sales of goods and services, after excluding the taxes and contributions applicable to the sales.

The benefit, already applicable to the IT, ICT and Call Center companies will be applied also to the companies engaged in the creation, designing or development of integrated circuits.

This change will become effective on August 1st, 2012.

Extension of the benefit of social security contribution rate reduction provided in article 22, items I and II, of Law nº 8.212/91 (article 45 of Provisional Measure 563 and changes of Law nº 12.546/11)

The Provisional Measure changed the wording of article 7 of Law nº 12.546/11, to (i) extend the list of sectors reached by the new payment system of the contribution set forth in article 22, items I and III, of Law nº 8.212/91, applicable to the gross revenue – already applicable to the IT, ICT and call center companies – to include the companies engaged in the creation, development or design of integrated circuits of the hotel industry; as well as (ii) reducing the 2.5% rate to 2%.

The new rule also changed the wording of article 8, Law nº 12.546/11, to (i) extend the list of sectors reached by the new system of contribution payment set forth in article 22, items I and III of Law nº 8.212/91, applicable to the gross revenue for the textile, furniture, plastics, electrical material, auto parts, bus, naval and air sectors, among others; (ii) as well as reduce the rate from 1.5% to 1%.

The Provisional Measure further included §1 in article 9 of Law nº 12.546/11, establishing that the calculation of the contribution to the companies that are not exclusively engaged in the activities mentioned above must be accomplished as follows: (i) activities previously described will be taxed at the rates of 1% or 2% over the gross revenue; and (ii) the other activities of the company must be taxed according to the contribution set forth in article 22 of Law nº 8.212/91, reducing the amount to be paid to the percentage resulting from the ratio between the gross revenue of the activities mentioned above (IT, ICT, call center, companies engaged in the creation, development or design of integrated circuits and companies of the hotel, textile, furniture, plastics, electrical material, auto parts, bus, naval and air sectors, among others) and the total gross revenue.

Finally, the rule included §3 in article 9 of Law nº 12.546/11, to establish that, specifically in connection with the periods where the company cannot contribute according to the new system, the contribution provided in article 22 of Law nº 8.212/91 shall apply to the Christmas Bonus.

These changes will become effective on August 1st, 2012.

PADIS - Programa de Apoio ao Desenvolvimento Tecnológico da Indústria de Semicondutores (articles 48 and 49 of Provisional Measure 563 and changes of Law nº 11.484/07)

The Provisional Measure extended the scope of the PADIS, the program supporting the technological development of the semiconductor industry, and relieved from the IPI, PIS and COFINS the acquisitions in the domestic market and the importation of inputs and assets of the semiconductor industry. The change became effective in April 2012.

Concept of predominantly exporting legal entity (article 50 of Provisional Measure 563 and changes of Law nº 10.637/02)

The Provisional Measure changed the wording of article 29, §3, of Law nº 10.637/02, to consider as predominantly exporting legal entity the one having as gross revenue from exportation more than 50% - and no longer more than 70% - of its total gross revenue from the sale of goods and services in the same period, after excluding the taxes and contributions applicable to the sales.

The definition is relevant because, according to Law nº 10.637/02, the charging of the IPI is suspended, upon the exits of raw materials, intermediary products and packing materials from the industrial establishment, in the event of acquisition by such predominantly exporting legal entities.

The change will become effective in April 2012.

REPES and RECAP (Article 52 of Provisional Measure 563/12 – changes of Law nº 11.196/05)

The Provisional Measure changed the wording of articles 2 and 13 of Law nº 11.196/05, reducing the minimum percentage of the exportation commitment to adhere to the special systems REPES (Regime Especial De Tributação Para A Plataforma De Exportação De Serviços De Tecnologia Da Informação) and RECAP (Regime Especial De Aquisição De Bens De Capital Para Empresas Exportadoras). The percentage is of 50% as of April 2012.

(Provisional Measure nº 563, Apr. 03, 2012)

LEGISLATION

Senate approves unification of ICMS rates applicable to interstate operations with imported products

The full session of the Senate approved, with 58 favorable votes and only 10 contrary votes, Resolution nº 13/2012, which unifies and reduces to 4% the ICMS interstate rate applicable to assets and goods imported from abroad. The rule was published in the Federal Official Gazette on April 26, 2012 and will be effective in January 2013, without a transition period.

The new rate will apply to operations with imported assets and goods that, after customs clearance, are not submitted to an industrialization process or which, though submitted to an industrialization process in the national territory, result in a product with an Imported Content of more than forty per cent (Imported Content being equal to the ratio between the value of the imported goods used as input and the total value of the exit operation).

The National Council of Fiscal Policy (Conselho Nacional de Política Fazendária - CONFAZ) will be the agency in charge of defining the criteria and procedures for the Certification of Imported Content of the imported products that are submitted to industrialization.

The new rate will not apply to the operations:

(i) with imported assets and goods that do not have a similar domestic equivalent, to be defined in a list published by the Council of Ministers of the Foreign Trade Chamber (Conselho de Ministros da Câmara de Comércio Exterior - CAMEX);

(ii) that carry natural gas to other States;

(iii) with property and goods resulting from an industrial process according to the terms of the Basic Productive Process (Processo Produtivo Básico - PPB) referred to in Decree-Law nº 288, of February 28, 1967, and Laws nºs 8.248, of October 23, 1991, 8.387, of December 30, 1991, 10.176, of January 11, 2001, and 11.484, of May 31, 2007.

(Federal Revenue Service Resolution nº 13, Apr. 25,2012).

PEC

E-commerce and other forms of electronic trade may have the ICMS shared among the States

The Senate is discussing the Proposal for a Constitutional Amendment that will govern the ICMS charging in electronic commerce. In its current wording, the Constitution does not discriminate between the various commerce modalities and, in interstate operations, it determines the tax sharing between the States of origin and destination only when the operation involves ICMS taxpayers. In operations with end consumers who are not taxpayers, the ICMS is payable only in the State of origin.

The current system, combined with the strong expansion of the electronic commerce and the concentration of the headquarters of the main companies of the industry in the South and Southeast States (especially in Rio de Janeiro and in São Paulo), already causes conflicts of authority between the States. In order to protect against the alleged losses of tax revenues, even without any constitutional support, States from the Northeast, North and Midwest have adopted ICMS supplementary rates in electronic operations and even signed, at the CONFAZ, the ICMS Protocol nº 21/2011, seeking to give an appearance of legality to such rates.

The Amendment Proposal changes the system currently in force and establishes the sharing of the ICMS applicable to interstate operations also when the destination is an individual (non ICMS taxpayer) and such operations are accomplished electronically. The wording of the amendment proposal has already been reviewed and approved by the Committee of Constitution and Justice of the Senate and will now be voted by the Senate Plenary Session in two rounds.

(Amendment nº 01/CCJ to the Proposals of Amendment to the Constitution nº 56/2011, nº 103/2011 and nº 113/2011 - Substitute. Available at: http://www6.senado.gov.br/mate-pdf/107884.pdf).

STATE LEGISLATION/SP

Extended list of products contemplated with presumed credit in the State of São Paulo

State Decree nº 57.961 (DOE-SP, Apr. 11.2012) extended the list of products contemplated with the presumed credit benefit of 7% over the sales value, established in art. 1 of Decree nº 51.624/2007. The following have been included (i) TV digital transmission devices; (ii) tactical and strategic transceivers for military radio-communication; (iii) digital receiver devices for radio-monitoring; (iv) radiofrequency testing and metering devices in cellular radio-communication equipment, with imbedded microprocessor; and (v) frequency specter analyzers.

In the case of the included products, the benefit is conditioned to the company (and the products themselves) being covered by art. 4 of Law 8.248/1991 (which grants tax benefits to legal entities that invest in IT research and development activities).

The new decree also establishes that, exceptionally, the SEFAZ-SP may grant a special system to legal entities still not eligible to receive the federal incentive, when they present the qualification application docket (issued by the Ministry of Development, Industry and Foreign Trade and by the Ministry of Science and Technology), whenever the qualification is a requirement to enjoy the applicable benefits.

(State Decree nº 57.961, DOE-SP, Apr. 11, 2012 / State Decree nº 51.624, DOE-SP, Mar. 01, 2007 / Federal Law nº 8.248, Oct. 2,1991).

STATE LEGISLATION/SP

State of São Paulo extends the term for regularization of the taxpayer who joined the Program of Incentive to Payment in Installments

Decree nº 58.010 (DOE-SP, Apr. 27.2012) introduced changes to Decree nº 56.102/2010, which governs the event of exclusion from the Program of Incentive to Payment in Installments (Programa de Parcelamento Incentivado - PPI). The taxpayer may only be excluded from the ICMS payment in installment in the case of debt listed for collection since September 1st, 2012 (before the Decree the date was March 1st, 2012).

(State Decree nº 58.010, DOE-SP, Apr. 27, 2012).

STATE LEGISLATION/SP

State of São Paulo reduces interest applicable to state tax debts

As a measure to foster economic activity, the State of São Paulo decided to reduce significantly the interest rate applicable to tax debts in arrears. In May, the applicable rate went from 0.08% per day (37.42% per year) to 0.04% per day. The measure was announced by means of DA Notices nºs 35/2012 and 36/2012, on the grounds of SF Resolution nº 31/2012.

In June, the interest rate will be reduced again to 0.03% per day. The new reduction was announced by DA Notices nºs 38/2012, 39/2012 and 40/2012, published in the Official Gazette of May 11, 2012.

(SF Resolution nº 31/2012, DOE-SP, April 28, 2012 / DA Notice nº 35, DOE-SP, May 03, 2012 / DA Notice nº 36, DOE-SP, May 03, 2012 / DA Notice nº 38, DOE-SP, May 11, 2012 / DA Notice nº 39, DOE-SP, May 11, 2012 / DA Notice nº 40, DOE-SP, May 11, 2012).

STATE LEGISLATION/MG

State of Minas Gerais sets the rules for the use of ICMS credits consequent of tax benefits not approved by the CONFAZ

The State of Minas Gerais published in the Official Gazette of March 21, 2012, Decree nº 45.931/2012, which introduced changes in the regulation of the use of ICMS credits consequent of tax benefits not approved by the CONFAZ.

According to the terms established in the Decree, the taxpayer is authorized to use the full amount of the credit consequent of receipt of goods or services, in interstate operations carried out between January 1st, 2012, and the day immediately preceding the date when the incentive or benefit is announced in Resolution of the State Finance Secretary.

It should be emphasized that such permission does not apply to the entries consequent of transfer operations, operations carried out by interdependent establishments or in any other situations where it may be proved that the taxpayer is aware of the granted incentive or benefit.

(Decree nº 45.931, Mar. 20, 2012 / DOE-MG, Mar. 21, 2012).

LOCAL LEGISLATION/SP

New ISS Regulation of the City of São Paulo

On May 18, 2012, Decree nº 53.151/2012 was published and revoked Decree nº 50.896/09, setting the rules for the applicability of the Tax on Services of Any Nature (Imposto Sobre Serviços de Qualquer Natureza – ISS) in the city of São Paulo.

The new ISS regulation basically consolidated the legislative tax changes that took place in the last three years. Among the main changes are those to make the regulation consistent with the new system of Electronic Services Bill (Nota Fiscal Eletrônica de Serviços - NFS-e), the inclusion of the tax incentives granted for the construction of the stadium in the East Zone of the City and the increase of some penalties for non-compliance with secondary obligations.

(Decree nº 53.151, May 17, 2012 / DOCidade-SP, May 18, 2012).

STJ

Interest Rate difference in connection with Court Deposits must be questioned at the Financial Institution

Direct Appeal filed by the State of Minas Gerais having as object the need to have the court deposit, that was adjusted at a rate lower than the one determined by the legislation, complemented by the taxpayer, has been judged.

The Justices of the First Panel of the Superior Court of Justice expressed opinion that the taxpayer is not a legitimate party in interest to answer such demand, so the discussion must take place against the depositary financial institution, in a separate lawsuit.

The State Public Treasury filed Motion for Clarification that was accepted by the Superior Court of Justice to clarify that the discussion against the depositary financial institution may take place in the same lawsuit where the deposits were made, in view of STJ Abstract 271, according to which "the monetary correction of the court deposits does not depend on specific lawsuit against the depositary bank".

(Motion for Clarification in Direct Appeal 1.234.702. – MG (2011/0011498-8 – Mar. 21, 2012). Available at: > https://ww2.stj.jus.br/revistaeletronica/ita.asp?registro=201100114988&dt_publicacao=21/03/2012).

STJ

STJ demands evidence of change of the debtor´s economic situation to renew on-line attachment

The Superior Court of Justice has recently analyzed the situation where, once the blocking of the amounts deposited in the debtor´s name in financial institutions by means of the BACEN-Jud system has been determined, there were no sufficient funds to carry out the online attachment.

The Third Panel of that Superior Court, confirming decisions handed down by the first and second judicial instances, expressed opinion to the effect that the creditor must demonstrate indications of change of the debtor´s economic situation to request a new survey by means of the BACEN-Jud system, so as to protect both the creditor´s right and the judicial structure.

(Direct Appeal 1.284.587 – SP (2011/0227895-6). / DJe, Mar. 01, 2012. Available at: http://www.stj.jus.br/SCON/jurisprudencia/toc.jsp?tipo_visualizacao=null&processo=1284587&b=ACOR.)

TIT

List of imported products subject to a reduced ICMS rate must be construed restrictively, even in the case of a subsequent change of the customs classification adopted by the Federal Revenue Service

The 11th Judging Chamber of the TIT, the Court of Taxes and Fees, has decided, by casting vote, to uphold in part the assessment drawn up by virtue of the application, deemed undue, of the reduced rate of 12% of the ICMS applicable to operations to import "farming implements and tractors, machines, industrial devices and equipment, and products of the electronic data processing industry" (provided in item V, art. 54, of the RICMS, ICMS regulation). According to the tax authorities of the State of São Paulo, the benefit would be conditioned to including the products in the list prepared by the State Administration (in this case, SF Resolution nº 04/98).

Part of the imported goods, due to a mistake made by the debtor, failed to be classified in the correct NCM positions (which would entitle to the benefit), whereas a second part was classified in positions equivalent to those originally contemplated in the list of SF Resolution nº 04/98, but which were changed within the federal scope without the corresponding updating of such list.

The leading vote of the judgment, given by reviewer Eliane Pinheiro Lucas Ristow, expressed restrictive opinion according to which it would not be possible to use the benefit of application of a reduced rate in the case where the NCM positions were changed in the federal legislation, even though such positions were equivalent to the ones originally included in the list of SF Resolution nº 04/98. Accordingly, it cancelled the assessment only with respect to the items where the taxpayer succeeded to prove, by a technical report prepared by the Institute of Technological Researches, the IPT, that there was a classification mistake.

(DRT Proceeding – 13 – 852557/2010 – 11th Judging Chamber / DOE-SP, Feb 27, 2012).

TIT

Vehicle monitoring and tracking services are not subject to ICMS applicability

According to opinion adopted by casting vote, in judgment held by the 12th Judging Chamber of the TIT, vehicle monitoring and tracking services are not characterized as communications services, the providers of such services being limited to using the communications services provided by other companies and which are necessary to their activities. For this reason, the monitoring services would be subject to applicability of the ISS, and not of the ICMS.

(DRTC Proceeding – III – 479662/2010 – 12th Judging Chamber / DOE-SP, Mar. 07, 2012 Available at: http://www.fazenda.sp.gov.br/tit/extrato/extrato1.asp?tipo=1&cd_drt=1C&nr_proc=479662&aa_proc=201. Accessed in: Apr. 2012).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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