Interest Rate Applicable To Intercompany Loans In Light Of The New Brazilian Civil Code

By Walter Douglas Stuber and Marcos Botter*

The purpose of this article is to analyze the recent changes brought about by the new Civil Code - NCC (Law nº 10406, of January 10, 2002) as concerns the interest rates for loan agreements between non-financial legal entities in Brazil. "Non-financial legal entities" are entities that do not participate in the Brazilian Financial System1.

1. Legal nature of loans

In line with the legal provisions long established in our legislation by the old Civil Code, articles 579 to 592 of the NCC make a distinction between commodate and loan.

Commodate exists where non-expendable things are loaned gratuitously and transferred. Non-expendable things are those that cannot be replaced with others of same kind, genre, quality and amount, such as, for instance, a Picasso.

Loan refers to expendable things, as money, where borrower (debtor) is required to return to lender (creditor) whatever borrower has received, in same kind, quality and amount.

As to companies, they make loans because of the pecuniary nature of the transaction. And as expressly indicated in the NCC, if a loan is made for economic purposes, interest will accrue and, subject to discount, may not exceed the rates provided for in article 406 of the NCC.

2. Legal aspects of interest rates

Article 1062 of the older Civil Code determined that legal interest, if not expressly set out in contract, would be 6% per annum. That determination would not apply if a provision as to the interest rate was included by the parties in the agreement concerned.

Article 1 of Decree nº 22626 of April 7, 1933 (Usury Law), in turn, forbade the inclusion of interest rates higher than double the legal rate, that is, whether or not contractually provided, the interest rate could never exceed 12% per annum, subject to the agreement being rendered null and void and imposition of other penalties provided in the Usury Law. The Usury Law banned any instance of doubled interest (anatocism), but allowed carrying forward overdue interest on net balances of current accounts from year to year.

That system was changed by the NCC, which governs the matter as follows:

"Article 406 - If no provision as to interest on arrears exists contractually, or no rate is set out in the contract, or even if it result from legal order, the rate shall be the rate in force and applicable to late payment of taxes collectable to the National Treasury."

Because article 406 of the NCC prescribes that interest rates will be governed by rule applicable to "payment of taxes collectable to the National Treasury", it is indispensable to analyze the Brazilian Tax Code - CTN (Law nº 5172, of December 25, 1966).

In this sense, article 161(1) of the CTN sets forth that on credits that fail to be fully paid on maturity will accrue delinquent interest at 1% a month, if the law does not provide otherwise. In view of that, the issue was...