Brazil: GSGA – Special Report – Brazilian Tax Review 01/2015 – December/January/February

Brazil issues a new regulation on the program to allow exporters to recover residual tax costs (REINTEGRA)

Law 13,043/2014 has reintroduced the program to allow exporters to recover residual tax costs incurred in the export production chain, ranging from 0.1% to 3% of their total export revenue (REINTEGRA). According to Decree 8,415/2015, the new recovery percentages are:

The percentage of imported inputs used in products, among other things, can limit eligibility for these benefits. There are also certain requirements that must be met.

Provisional Measure 668/2015 increases PIS and COFINS levied on imported products

Provisional Measure 668/2015, published on January 30, 2015, increases the general PIS and COFINS tax rates on imported products, beginning May 1, 2015.

Under the new provisions, the general tax rates will be increased from the current 1.65% and 7.6% (PIS and COFINS, respectively) to 2.1% and 9.65%. In addition, there is an increase in the tax rate applied to specific products, including beauty products, machines and vehicles, among others.

These new rates must be applied with the additional 1% of COFINS tax if the imported product is listed in Appendix I of Law 12,546/2011. However, the Provisional Measure prohibits the credit related to the additional 1% for taxpayers under the non-cumulative method.

Brazil launches AEO ("Authorized Economic Operator") program

Upon the issuance of Normative Instruction 1,521/2014, Brazilian Federal Revenue (Receita Federal do Brasil), or RFB, launched the first phase of the AEO Program. This is a voluntary certification program for supply chain operators related to international trade who present low risk in terms of physical cargo security and tax and customs compliance.

Some of the benefits for certified operators are: recognition by international customs administration via a Mutual Recognition Agreement (MRA), a direct communication channel in customs to solve an AEO's problems, fewer physical and document examinations by customs in export transactions and requirement waivers in qualification for special customs systems.

According to the Normative Instruction, the implementation of the Brazilian AEO Program is scheduled to be conducted in three stages:

a) AEO Security (AEO-S), beginning March 2, 2015: authorized economic operators will be certified based on compliance with security requirements. The focus at this stage will be on export flow;

b) AEO Compliance (AEO-C), beginning March 1, 2016: the certifications will be given based on compliance with customs and tax rules and procedures;

c) AEO Integrated (AEO-I), beginning March 1, 2016: at this stage, requirements for AEO-S and AEO-C will be considered.

The Supreme Court (STF) holds that ICMS is not levied on imports of goods under a lease agreement

The Supreme Court issued a decision holding that customs clearance of imported good is only subject the ICMS tax if the transaction involves a transfer of the ownership of the item in question. Therefore, imports under lease agreements will not be subject to the ICMS if there is no prior acquisition option.

Since the appeal was decided under the general repercussion system, this holding is binding on all future cases.

The Superior Court of Justice (STJ) holds that commercial companies' transportation expenses are inputs for the purposes of PIS/COFINS taxes

In deciding an appeal from a company in the state of Rio Grande do Sul, the STJ held that commercial companies' expenses with spare parts, fuel and lubricants related to the transportation of goods to customers are considered inputs (as defined in article 3(II) of Laws 10,637/2002 and 10,833/2003). In this case, the STJ held that since the commercial company also performs the distribution of the goods to its customers using its own trucks, the company was also a services provider, which allows it to recover PIS/COFINS credits related to inputs (the legislation only allows manufacturers and services providers to calculate these credits).

This holding might set an important judicial precedent for all commercial companies using the non-cumulative PIS/COFINS tax method since it applies a more extensive interpretation of "inputs" for the purposes PIS and COFINS credits and grants commercial companies the right to recover them if they also render services to their customers.

Tax on Financial Transactions (IOF) on Revolving Credit Agreements and Other Credit Transactions

The Brazilian Taxpayers Council ("CARF") has recently decided a case (Decision #3102-002.318 of 11/11/2014) regarding IOF taxes on revolving credit agreements by non-financial entities. The CARF held that these transactions are real loan agreements and are therefore subject to the IOF tax.

In their decision, the judges made a distinction between revolving credit agreements and the contracts formalized in a group of companies, in which one of the parties becomes responsible for carrying out the administration of the financial resources of the group, making and receiving payments on behalf of its members. In this type of contract, the judges held that the credit transactions between the parties and the financial transfers that occur between them are not considered lending transactions and are therefore not subject to the IOF tax.

The Court has held in the same fashion in other cases, but this issue is still not settled since there are others decisions favorable to the taxation of these transactions.

Brazil launches a new system in the International Trade Single Window for digital delivery of documents

As a part of a project to bring together all systems involved in import and export procedures in order to simplify these transactions, Brazilian authorities have published COANA Ordinance 107/2014 and Normative Instruction 1,532/2014 to implement a new system in which the documents related to import customs clearance procedures can be delivered digitally.

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