Brazil Tax Round-Up - August 2019

IPI tax rate for ingredient used in soft drink manufacturing modified

On July 1, 2019, Decree No. 9.897/2019 was published, amending the Supplementary Note NC (21-2) in Chapter 21 of the IPI Tax Table ("TIPI"). The tax rate for the product classified under NCM code 2106.90.10—which refers to compound non-alcoholic preparations (concentrated extracts or concentrated flavors), used to manufacture of soft drinks listed in Chapter 22, with a dilution capacity of up to 10 parts of the beverage for each part of the concentrate—has been changed.

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Senate bill intends to change administrative proceedings deadline count

On July 4, 2019, the Constitution and Justice Commission ("CCJ") approved Senate Bill ("PLS") No. 35/2018, which proposes that administrative proceedings should be counted only in business days, as is the case with judicial lawsuits. This would extend deadlines, skipping weekend days and government-observed holidays.

The bill is now under consideration by the House of Representatives.

OECD and Brazilian IRS issue joint report on tax matters

On July 11, 2019, the Brazilian IRS and the OECD issued a joint report following a series of discussions with shareholders, lawyers and tax authorities that began in February 2018 to analyze Brazil's administrative and legal treatment of transfer pricing and compare it with the practice adopted by OECD member countries.

The report concluded that in order to be aligned with OECD rules, Brazil would need to adopt the arm's length principle by taking steps including simplifying bureaucratic processes to facilitate compliance, increasing the effectiveness of tax administration and assuring tax legal certainty in international transactions.

Resolution No. 83/2019/CAT/PGACTP/PGFN-ME: Criterion for zero rate on IOF

On July 14, 2019 PGFN Resolution No. 83/2019/CAT/PGACTP/PGFN-ME was published, establishing that the zero rate of the Tax on Financial Transactions in the Currency Exchange ("IOF-Câmbio") must be applied in the settlement of export exchange contracts, in accordance with the terms set forth by National Monetary Council ("CMN") and the Central Bank of Brazil's ("BACEN") regulations.

Note: The zero rate will be levied regardless of whether the funds were initially received in an account held abroad.

Normative Instruction No. 1,901/19: Repetro-Industrialização regulation

On July 19, 2019, Normative Instruction No. 1901 was published, establishing a special regime for the manufacturing of goods...