TAX REPORT Nº 2

FEDERAL REVENUE OF BRAZIL  – INQUIRIES

Inquiry No. 16/2013

Regional Superintendence of the Federal Revenue - SRRF/ 6th RF Decision Subject: Contribution for Financing of the Social Security  - Cofins.

Headnote: CREDITS DERIVED FROM TRANSACTIONS CARRIED OUT IN THE DOMESTIC MARKET OR EXPORT OF GOODS. SUCCESSION BY PARTIAL SPIN OFF. DEDUCTION OF DEBTS FROM THE SAME CONTRIBUTION.

In the event a company under Cofins non-cumulative regime  does not incorporate to its assets credits of such contribution, by reason of the partial spin off of another company, also subject to the same non-cumulative regime, the surviving company may deduct from the debts of the referred contribution, under the terms of the applicable laws, both the credits governed by art. 3 of Law No. 10.833/2003 and the credits governed by  art. 6 of the same law. This deduction is only possible in the cases and under the circumstances that the spin-off company was also authorized under the law to do it, before the partial spin-off.

LEGAL GROUNDS: Law No. 10.865/2004, art. 30; Law No. 10.833/2003, arts. 3 and 6.

Subject: Contribution for  PIS/Pasep.

Inquiry No.18/2013

Regional Superintendence of the Federal Revenue - SRRF/ 9th RF Decision Subject: Contribution for Financing of the Social Security  - Cofins.

Headnote: PROVISION OF SERVICES. EXPORT. NON-TAXATION.

The existence of a third person in the business relationship between an individual or a legal person resident or domiciled abroad and a Brazilian service provider does not affect the legal relationship required under art. 5, subsection II, of Law No.  nº 10.637, of 2002, and in art. 6, subsection II, of Law No. 10.833, of 2003, for the purposes of recognition of the non-taxation of the Contribution for PIS/Pasep and Cofins, respectively, provided that the third person acts in the capacity of a mere mandatary, i.e. not in his/her own behalf, but for the account of a principal – individual or legal person – resident or domiciled in another country. 

Only the mechanisms available to the foreign carrier for payment of expenses incurred in the Country, pursuant to the rules stipulated by the Central Bank of Brazil, represent the actual foreign currency inflow in the country and authorize the application of the referred non-taxation rules.

Even if any valid form of payment is used for the purposes of obtaining the benefit of the referred non- taxation, the need for proof of a nexus between the payment received by a legal person domiciled in the Country and the actual provision of services to an individual or legal person that is resident or domiciled in another country shall always remain. 

The provision of services to an individual or legal person resident or domiciled abroad whose payment is made by any other form not listed among the hypotheses set forth in the rules stipulated by the Central Bank of Brazil is not to benefit from the non-taxation of the contributions.

Legal grounds: Law No. 10.637, of 2002, art. 5, II; Law No. 10.833, of 2003, art. 6, II.