Brazilian Tax Review – September/October/November 2015

1) THE SUPERIOR COURT OF JUSTICE HOLDS THAT THE FEDERAL EXCISE TAX (IPI) IS LEVIED ON SALES OF IMPORTED GOODS

Even though an earlier ruling from the Superior Court of Justice was favorable to taxpayers, in a decision under the repetitive appeals system (Recursos Repetitivos), the Court held that sales of imported goods are subject to the Excise Tax (IPI) even in cases in which the imported goods were not subject to any manufacturing process.

The decision is binding on lower courts in cases regarding the same issue.

2) THE STATE OF SÃO PAULO CHANGES ICMS TAXATION ON TRANSACTIONS INVOLVING SOFTWARE

The São Paulo State Treasury Office issued Decree 61,522, to introduce changes to the tax calculation basis for the ICMS (the State VAT) levied on transactions involving software. The decree revoked a previous rule (Decree 51,619/2007) that the ICMS calculation basis for transactions involving software (whether customized or not) should be twice the market value of the physical media that stores the software (CD, pen drive, etc.).

This rule was followed by a national agreement (92/2015) that establishes that these transactions will be subject to a minimum 5% ICMS tax rate.

In this context, the new legislation stirs up controversy over ICMS taxation of software, even though the tax will not be levied in São Paulo on acquisitions through downloads until a new rule establishes where these transactions take place and which state should collect it (given that there is no physical movement of goods in these transactions).

3) SÃO PAULO STATE TREASURY OFFICE REGULATES THE INCLUSION OF THE ADDITIONAL FREIGHT CHARGE FOR RENEWAL OF THE MERCHANT MARINE ("AFRMM") IN THE CALCULATION BASIS OF THE STATE VAT (ICMS)

Based on a previous ruling from the Supreme Court, which held that the Additional Freight Charge for Renewal of the Merchant Marine (AFRMM) is a kind of tax, the São Paulo State Treasury Office enacted CAT Normative Decision 1/2015 to state that the AFRMM must be included in the ICMS calculation basis for imports.

The AFRMM is levied on the freight charged by Brazilian and foreign navigation companies operating in Brazilian ports. By doing so, state authorities are formally stating the state's position on this issue, which must be complied with by importers in order to avoid tax assessment notices.

4) FEDERAL DECREE 8,543/2015 ESTABLISHES NEW RECOVERY RATES FOR PROGRAM TO ALLOW EXPORTERS TO RECOVER RESIDUAL TAX COSTS (REINTEGRA)

Federal Decree 8,543/2015...