Brazil: Newsletter - KLA August

Last Updated: 5 September 2019
Article by Koury Lopes Advogados

Check below the most important market news analized by KLA specialists. In the August edition, you will find matters related to Dispute Resolution and Arbitration, Tax, Antitrust, Public Law, Capital Markets and Corporate and M&A.



The new Internal Regulations of the Administrative Council for Economic Defense (“CADE”) will come into force on September 24, 2019. The resolution proposing the amendments was published for public consultation in the second half of 2018 and was approved by CADE’s Tribunal mid-June.

In addition to the amendments in the text to address the standard concerns as to the adequacy of the existing regulations that were enacted by Law 12.529 / 2011 (“Brazilian Competition Law”), the new text introduces changes relating to the commencement of proceedings and deadlines. Among said changes, we highlight the ones pertaining to motions for clarification of decisions. Pursuant to Article 221 of the new Internal Regulations, motions for clarification no longer suspend the enforcement of CADE's decisions.

With these changes, the notion of opposing motions merely to delay the enforcement of CADE’s decision is no longer viable. Conversely, parties found to be in violation of the provisions of the Brazilian Competition Law, will now have to act swiftly in order to respond to or avoid the impending consequences of CADE’s decision, such as obtaining a court injunction to suspend the payment of a fine, for example, given the fact that the filing of a motion for clarification can no longer prevent CADE from enforcing a decision demanding the payment of the fine in full.

To access the table with the changes provided by the new Internal Regulations in Portuguese, please access.



The so-called amnesty programs or special installments programs have already become a common practice in Brazil.

A recent and emblematic program was the so-called “REFIS da Crise” (Law No. 11.941/2009), in which taxpayers who opted for the installment payment should calculate the amount they intend to pay, applying the fines and interest reductions, and were allowed to pay a minimum installment, until the consolidation phase of the program, when the taxpayers could access the Federal Revenue system and effectively indicate the debts to be paid in installments, and then start to pay the correct amount of the installments.

Nevertheless, due to several failures in the system used by the Federal Revenue, there was a delay of approximately 20 months for the release of the consolidation phase, and in the meantime, many taxpayers continued to pay the minimum installment.

After the consolidation, the Federal Revenue started to charge interest (SELIC rate) on the amount of the debts in relation to this period between the inclusion of the debts and the consolidation of the program.

Some taxpayers went to court, claiming that the delay was caused by the Federal Revenue itself, reason why no interest should be due during such period.

Recently, however, the Superior Court of Justice considered valid the charge of such interest, even though the taxpayer did not cause the delay, since the interest would be intended to compensate the non-payment of the taxes in a timely manner in a broad concept.


The Attorney General's Office of the National Treasury (“PGFN”) has, in several Tax Foreclosures pending before the Federal Court of São Paulo, requested the replacement of guarantee insurances and bank letters (guarantees expressly authorized by law) for judicial deposit.

This new procedure aims to obtain guarantees with greater liquidity in cases where the National Treasury finds a high probability of success in the proceeding.

The Federal Court in São Paulo, until the present moment, has issued four (4) favorable decisions to the tax authorities, determining the replacement of the guarantee by the judicial deposit. There are other fifteen (15) requests pending analysis.

This offensive is questionable as the insurance guarantee and the bank letter are expressly provided by law as a possible guarantee to be presented by taxpayers in tax foreclosures and represent a high liquidity guarantee (compared, for example, to goods and real estate). In addition, this measure increases the tax burden for taxpayer, who is obligated to deposit large amounts in a short time frame.


The municipality of São Paulo has assigned to the Secretariat of Finance the authority to set minimum prices for certain types of services taxed by the ISS (tax on services), according to a predefined tax schedule. The city’s finance department the published an Ordinance, charging amounts in excess of the minimum amounts.

Recently, the Court of the State of São Paulo analyzed a case related to such charge and understood that the charge of additional ISS based on an Ordinance (and not on a Law) would not be legitimate, considering that such charge would depend of a complementary law, defining the proper tax basis to be considered in such cases.


Following the official publication of Decree No. 63.099/17, the Public Finance Department of the State of São Paulo started to charge the ICMS on software sales through download or streaming, at a 5% rate over the value of the transaction.

The Special Chamber of the Court of Justice of the State of São Paulo was recently called to analyze the legitimacy of such ICMS charge, but it understood that the issue under discussion would, in fact, deal with the illegality or not of the Decree vis-a-vis the São Paulo legislation, which could be analyzed by regular Panels of the Court (i.e. would not need to be reviewed by the Special Chamber).

Such refusal to analyze the matter brings insecurity to taxpayers in the state of São Paulo, and leaves this important issue still open, depending on individual judgments by the Chambers of the Court, which may take conflicting positions.


In October 2016 the Federal Supreme Court finalized the trial on the possibility of refund of the ICMS-ST (VAT tax due in a substitution modality and paid in advance by one specific taxpayer of the commercial chain), when the final value of the transaction does not correspond to the price estimated by the legislation.

The Supreme Court considered that, in cases where the legislation defines a higher margin than the actual final price of the goods, taxpayers would be authorized to the refund of ICMS-ST paid in advance.

At the opportunity, the Supreme Court also declared constitutional the São Paulo Law that already provided the possibility of refund, but only for cases of final price fixed in normative acts (the so-called tax schedule, which is a different method of definition of the ICMS-ST basis).

Furthermore, the Supreme Court modulated the effects of its decision, establishing that the refund would be valid only from the trial date onwards - October 19th, 2016.

Following such trial, the State of São Paulo issued several normative acts, especially the Ordinance n. 14/2018, which provides the possibility of refund of the overpaid ICMS-ST, regardless the method of definition of the ICMS-ST basis (if by added value margin or if by tax schedule), but only from October,2016 onwards.

On August 7th, 2019, however, the Special Chamber of São Paulo Court of Justice ruled unconstitutional the provisions of São Paulo legislation that only recognized the right to refund in the case of a tax schedule, ruling that the right to refund should be applied in any situation of ICMS-ST tax overpaid.

This judgment opens up the possibility for taxpayers to claim the refund of the ICMS-ST even before October, 2016 (within the five-year statute of limitation, however), since the São Paulo law that limited the right to refund only to tax schedule cases was now declared unconstitutional.



Early last month, following a public consultation, which had collaboration of professionals specialized in the subject, the Decree No. 64.356/2019 was published in the Official Gazette of São Paulo, setting forth rules to regulate the use of arbitration in the resolution of conflicts regarding the direct State Public Administration and its municipalities.

The Decree innovated in terms of the possibility of applying the arbitration clause in contracts entered into by the direct and municipal public administration of the State of São Paulo. The competent authority was granted freedom to insert or not the arbitration clause in a given contract, unless expressly stated otherwise by the competent collegiate organ responsible for drawing up the guidelines of the contract.

Prior to the Decree, the list of contracts that could contain an arbitration clause was more restricted, limited to concession contracts and Public-Private Partnerships with amounts exceeding BRL 100 million. Minimum criteria have now been set for the use of arbitration, which may encourage its use with the public authorities.

The Decree has given preference to institutional arbitrations, conducted by professionals and specialized institutions, over “ad hoc” arbitrations, which have not been expressly vetoed, but conditioned upon prior justification.

Regarding the arbitrator who exercises the law, the Decree provides for the obligation to inform about the existence of a demand against the Public Administration, either sponsored by him or by the office to which the arbitrator is associated, which may cause difficulties regarding the verification. impartiality and absence of conflict of interest in a dispute.

As the arbitration panels, the Decree instituted that they must be registered, specifying minimal eligibility requirements, providing more transparency by preventing full leeway of the process. Another change in the Decree is the forbiddance of condemnation of the losing party to reimburse the contractual attorney’s fees of the prevailing party, applying by analogy the loss of suit expenses system predicted in the Code of Civil Procedure.



On August 6, 2019, it was published the Decree No. 9957 regulating the procedure for new public bids of the partnership agreements currently in force in the road, railway and airport sectors. This Decree is linked with the Federal Law No. 13,448/2017.

Thanks to the publication of this Decree, a group of companies may terminate their agreements due to financial and other problems (Car Wash Operation) and, in this line, the Government may proceed with public bidding proceedings, offering the same opportunities on road, railway and airport sectors.

The group of companies that held the partnership agreements shall receive a payment of indemnity for unamortized or depreciated reversible assets linked to those agreements. Fines and other debts will be deducted from the indemnity amount.

Likewise, the Government shall not lose the investment done, and upon such transfer of agreement, may keep the efforts and investment with a financially stable company, upon a new public bidding proceeding.


On August 14th, the Ministry of Infrastructure published the Ordinance No. 530, that aims to consolidate the development of a public policy for the contract management and the lease of the ports, which should provide more legal certainty and unlock private investments. The main points of the ordinance are the contract alterations and the restoration of economic and financial balance, arising from the contractual alterations.

In lease agreements for port facilities located in organized ports, the Granting Authority may authorize investments not provided for in the contract, subject to the public interest.

Also, in specific cases of greater economic relevance the Granting Authority may promote the unification of contracts if the lessee requires so, by incorporating the areas involved in the contract.

The extension of the port lease agreements may occur at the discretion of the Granting Authority, provided that there is a contractual clause allowing it and upon proof of the benefit of extension in relation to the a new bidding.

According to the Ministry of Infrastructure, the lessee will be able, with the new Ordinance, to make investments in port infrastructure, to incorporate successive extensions for the existing contracts, obtain more freedom to make investments in the leased area and will have the area replacement as a way of managing and planning of the organized port.

The Minister of Infrastructure emphasized that the purpose of this Ordinance it is to establish more predictability, reduce risks, improve the business environment and open space for new investments.


On August 9th of 2019, the Mayor of São Paulo City promulgated the Decree that regulates definitively the use of electric scooters activated by apps. In short, the definitive Decree regulates: (i) the sharing service of the apps; (ii) the register of the interested companies - the Micromobility Technology Operator (“OTM”); (iii) the rules for circulation and parking; (iv) the obligations of OTM; and (v) the applicable penalties.

The greater innovation of the Decree was to establish that the devolution of the scooters will not be permitted to be done out of the stations or out of the parking spots that will be designated.

Among the most relevant rules, we highlight the following: (i) 20 km/h as speed limitation; (ii) traffic allowed only in bike paths, cycle tracks and leisure streets; (iii) the scooters must have a speed indicator, a bell, a night signalization on the front, back and at the lateral, besides that the wheels must also have their dimensions of breadth and length equal or inferior as of a wheel chair.

It is worth mentioning that the circulation of the scooters must occur in lanes that have their maximum speed of 40 km/h and will not be permitted the circulation on sidewalks, tracks, on the side of the road, neither in the other lanes designated to pedestrians and vehicles. In addition, it will not be permitted the use for people less than eighteen years old.

The Decree entered into force on August 10th, 2019 and the permitted OTM will have the deadline of 60 (sixty) days to adapt to the new regulation.



Following the last decisions for diminishing bureaucracy over the business activity, including for financing entities, the Brazilian Central Brank published last August 29 the Resolution No. 4,470, setting forth that biannual and annual financial reports of financial entities may now be published not only in the company’s premises but also in a webpage created for such purpose.

In this sense, the financial entities may now choose, at their sole discretion, to use the internet to publish their biannual and annual reports. Such measure may help companies to overcome bureaucracy and disclose information to public and investors in a more effective way.

The above-mentioned resolution amplified the effects over the decision of the National Monetary Council (CMN) held on May 30, 2019, which provided that only the quarterly and biannual financial reports should be published in the internet.

It is important to stress out that the Federal Government is deliberating a similar provision for stock companies, granting them the right to publish its reports in the company’s website.

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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