Law no. 12, 766 was published on December 28, 2012. Subject matter of conversion of Provisional Measure ("MP") no. 575/12 into Law, it brings a number of changes related to the tax legislation, among other provisions.
As there are several measures brought by this Law, we will deal with the main tax changes according to its respective law of origin, as follows: ·
- Amendment to Law no. 11,079, dated December 30, 2004, which created general rules for public tenders and the entering into public and private partnerships within the Public Administration
With the enactment of MP no. 575/12, converted into Law no. 12,766/12, the amount of fund contribution made in favor of the private partner for the execution of constructions or the acquisition of 'reversible assets' may be excluded from the determination of the net income and from the tax basis of the Contributions to the Social Security Funding ("COFINS"), to the Employee Profit Sharing Program ("PIS"), and the Contribution on the Net Income ("CSLL").
In this context, the portion of fund contribution excluded pursuant to the above proceedings must only be computed in the determination of the net income and in the tax basis of the COFINS, PIS, and CSLL in the proportion in which the cost for executing the constructions and acquiring reversible assets is realized, including through depreciation or end of concession.
- Amendment to Law no. 10,833, dated December 29, 2003, which deals with the Contribution to the Social Security Funding ("COFINS")
Another change created by Law no. 12,766/12, with effects coming into force as of Jan. 1, 2013, establishes that the revenues deriving from the trade of crushed stone, sand for civil construction, and crushed stone sand will be subject to the COFINS' cumulative system.
It is of note that this taxing system had already been created, for the purpose of the Contribution to the PIS, by article 6 of Law no. 12,693/121.
- Amendment to Law no. 9,430, of December 27, 1996, which deals with the federal tax legislation, the contributions for the social security, the administrative consultation process, and other provisions.
Law no. 12,766/12 also brought important changes regarding the transfer pricing rules created by Law no. 9,430/96, specifically as to the deductibility of expenses with interest2, establishing that the interest paid or credited to legal entities will only be deductible for the purpose of determining the taxable income up to the amount that does not exceed the amount calculated based on some of the following rates:
I – market rates of sovereign securities of the Federal Republic of Brazil issued in the foreign market in U.S. dollars, in the event of transactions at pre-fixed U.S. dollar rates;
II - market rates of sovereign securities of the Federal Republic of Brazil issued in the foreign market in reais, in the event of transactions abroad at pre-fixed rates; and
III - London Interbank Offered Rate – LIBOR, for the term of 6 (six) months, in other cases.
It should be stressed that, along with the rates defined as above, for the purpose of calculating the interest deductibility limit, a percentage margin – a spread margin – will also be added, which will be defined by an act of the Ministry of Treasury.
The mentioned law also determined that the Ministry of Treasury may set the applicable rate when determining the deductibility limit in the case of transactions in reais abroad at floating rates.
Furthermore, for transactions carried out in other currencies in which a specific LIBOR rate is not issued, the LIBOR rate for deposits in U.S. dollars is to be used.
In addition, Law no. 12,766/12 sets forth that the verification of the deductibility limit described above must be used on the date the transaction is entered into and will be applied to the agreements made as of January 1, 2013. It is worth pointing out that, according to the mentioned rule, novation and renegotiations will be considered new agreements.
Lastly, the above provisions will be ruled by the Federal Revenue Office of Brazil, including with regard to the specifications and conditions of use of the stated rates3.
- Amendment to Provisional measure ("MP") no. 2,158-35, of August 24, 2001, which amends the legislation of the Contributions to the Social Security - COFINS, to the Employee Profit Sharing and Formation of the Civil Servants' Net Worth Programs - PIS/PASEP and of the Income Tax, among other provisions.
Law no. 12,766/12 also brought important changes as to the general system of penalties for the non-performance of the provisions related to the RFB's accessory bookkeeping requirements originally provided for in article 57 of MP no. 2,158-35/01.
In fact, with the amendment to this article, the tax debtor that fails to submit the statements or digital bookkeeping required by the RFB4 within the set term, or submits them containing incorrect information or omissions, will be required to submit them or provide clarifications within the terms set by the RFB and be subject to the following fines:
I – for untimely submission:
a) R$ 500.00 (five hundred reais) per calendar month or fraction thereof, relative to legal entities that, in their last submission, ascertained their profits by the presumptive profit method;
b) R$ 1,500.00 (one thousand and five hundred reais) per calendar month or fraction thereof, relative to legal entities that, in their last submission, ascertained their profits by the taxable income method or determined them themselves;
II – for failure to meet the order of the RFB to file their statements or digital bookkeeping or to provide clarifications within the terms set by the tax authorities, which will never be shorter than 45 (forty-five) days: R$ 1,000.00 (one thousand reais) per calendar month;
III – for filing their statements or digital bookkeeping containing incorrect, incomplete, or missing information: 0.2% (zero point two percent), not lower than R$ 100.00 (one hundred reais), on the revenue –meaning the revenue deriving from the sale of goods and services– of the month prior to that in which the incorrect statements or digital bookkeeping were submitted.
It is of note that a reduction of 70% (seventy percent) on the penalty amounts and percentages mentioned above is provided for in case the legal entity has opted for the Federal Simplified Tax System for Small Businesses (Simples Nacional).
Furthermore, with regard to legal entities that, in their last filing, used more than one form of profit ascertainment or carried out a corporate restructuring event, the fine specified in letter b of item I above is to be applied.
It is important to stress that the fine stated in item I above will be reduced by half when the statements or digital bookkeeping are not submitted within the set term, but before any official procedure.
- Amendment to Law no. 10,925, dated July 2004, which reduced the tax rates of the PIS/PASEP and COFINS charged on the import and domestic trade of fertilizers and agribusiness protection products, among other provisions.
Lastly, Law no. 12,766/2012 maintained, up to Dec. 31, 2013, the reduction to zero of the tax rates of the Contribution to the PIS and COFINS charged on the import and gross sales revenue in the domestic market of wheat flour, wheat, and their own premixtures for the production of ordinary bread, as a tax incentive.
1 Which included item XII into article 8 of Law no. 10,637/02.
2 It is worth noting that the same criteria used for the limitation of the expense deductibility with interest will apply in cases related to the receiving of interest by the Brazilian legal entity for the purpose of determining the minimum revenue.
3 As to this, we point out that Normative Rule of the Federal Revenue of Brazil ("IN RFB") no. 1,312 was published on Dec. 31, 2012, providing for the transfer pricing rules created by Law no. 9,430/96 and amended by Law no. 12.715/12, and which created another rule as to the deductibility of expenses of interest paid and credited to related persons abroad. In addition, IN RFB is to be altered in order to contemplate the amendments made to Law no. 12,766/12 in this sense.
4 Pursuant to article 16 of Law no. 9,779/99.
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.