LEGAL DEVELOPMENTS - BRAZIL
Tax Treaty approved by the Brazilian Government 1
Additional 0.5% levied over the
Employees Severance Indemnity Fund (“FGTS”) 2
Outflow statement related to services
and goods exportations 2
Brazilian Federal Revenue publishes
normative ruling on special fiscal regime for real estate developers 2
Mandatory application of resources
in Research and Development (R&D) of the electric area and in programs of
energetic efficiency to the final customer 3
Client Identification, Maintenance
and Real Estate Transactions Registration. 3
Arbitration clauses in public agreements 4
TAX
Decree no.
5922, published on October 4 of 2006, approved the Tax Treaty between Brazil and South Africa to avoid double taxation and prevent tax evasion with regard to income tax.[back]
Among other
dispositions, Complementary Law no. 110/01 set forth an additional 0.5% over
the FGTS, in order to cover the expenses derived from the understated
inflation of the economic plans “Verão” and “Collor 1”. The forecast for the
initial collection term was established in October 2001 and valid for a
period of 60 months.
However, some
entities filed claims against the initial collection term. In these cases,
the Federal Supreme Court (“STF”) stated that the collection period would
commence in January 2002.
In addition to
this controversy regarding the commencement of the initial collection term of
the additional 0.5% over the FGTS, entities must also bear in mind the
conclusion of the collection term, since depending on when payment was first
made, the 60 month term may have already elapsed. [back]
Normative
Ruling n.º 687, of the Brazilian Federal Revenue, (“NR 687”) published
on October 30, 2006, determines that individuals and legal entities resident
abroad that maintain foreign currency related to exports of services and
goods must file with the Federal Revenue Office, on an annual basis, a
statement concerning the use of such funds.
It must be
noted that the funds kept abroad may only be used for investments, financial
applications or payment of obligations, it being prohibited to use them for making
loans of any nature.
NR 687 requires
that each legal entity keep an accounting book for these purposes, regardless
of the income tax system that has been chosen.
Failure to file
the above statement is sanctioned with fines amounting to 0.5% per month or
fraction, to be calculated on the basis incident of the value of the funds kept
or used abroad and not informed to the Brazilian Federal Revenue within the legal
term, up to a maximum fine equal to 15%.
It is worth
mentioning that the fine may be reduced by 50%, in case the statement is
filed before the Brazilian Federal Revenue starts proceedings. On the other
hand, in case of fraud, the penalty may be duplicated. [back]
Normative Ruling n.º 689 (“NR 689”)
of the Brazilian Federal Revenue, published on November 29, 2006, changes the
rules applicable to the special fiscal regime for real estate developers (“SFR”),
created by the Federal Law n. 10.931/2004.
The SFR is an option for the real state
developer by which each project and its ancillary elements cannot be seized in
case of debts of the real estate developer concerning Corporate Income Tax, Social
Contribution over Net Profit, and Social Contributions (“PIS and COFINS”) for
the Social Security. For each project subject to SFR, the real estate
developer must pay 7% of the income arising out of the sale of that specific project
per month.
The main development of NR 689 is that, as from November 29, 2006, all
the real estate developers that choose the SFR must register each of their projects
in the National Registry of Legal Entities (Cadastro Nacional de Pessoas
Jurídicas, the so-called CNPJ). Nowadays, such regidstration may be made through
the Federal Revenue website. [back]
ENERGY
Normative
Resolution n.º 233, of the Electric Energy National Agency, of October 24,
2006, established the methods and procedures for the calculation, application
and payment of the funds to be used by the concession holders of public
services for Energetic Efficiency and/or R&D projects, as well as for Technological
and Scientific Development National Fund and for the Ministry of Energy,.
It is worth
mentioning that wind, solar and biomass generators, co-generators and mini-hydro
generators are excluded from the above obligations. Auto-producers are also
excluded, except in relation to the revenues derived from the output sold. [back]
REAL ESTATE
The Financial Activities Counsel (“COAF”) enacted on October
23, 2006 Resolution 14 (“Resolution 14”) effective as from November 26, and
which sets forth the procedures to be followed by legal entities engaged in
promotion and sale of real estate. Resolution 14 seeks to prevent and avoid
money laundering crimes.
Such legal entities must be registered in the COAF, keep their
records updated, and provide certain information such as trade name, enrollment
with the National Registry of Legal Entities, registered address, and identification
of the person responsible for compliance of Resolution 14 and identification
of clients. Also, all real estate transactions amounting to R$ 100.000,00 or
more must be reported to the COAF.
Notices to COAF must be made within 24 hours, and the
registrations and records must be kept for a minimum period of 5 years as
from the closing date of the transaction.
Failure to notify a transaction may be deemed to constitute a
crime. [back]
ARBITRATION
A decision issued by the Brazilian
Superior Court of Justice in the Special Appeal no. 612.439 - RS, published
on September 14, 2006, stated that agreements entered into by Brazilian
public companies engaged in the production and trade of goods or in the
rendering of services, which contain arbitration clauses, are valid and
binding on the parties, who will have to submit to arbitration any potential dispute
and conflict arising from said agreements. The issue was not free of doubt
prior to this ruling.[back]
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