Publications

Category: Real estate

Municipal Complementary Law (LC) No. 192/2018, published on July 19, establishes special conditions for the licensing of buildings (future improvements – named “mais valerá”) and additions in buildings (improvements – named “mais-valia”) in order to stimulate the regularization of buildings in the city of Rio de Janeiro and increase tax collection of the municipality. In 2015, when another improvements law was enacted, legalization of additions yielded R$ 1 billion for municipal public coffers.

The “mais-valia” is the amount paid to the city government to legalize improvements/additions built on residential and commercial real estate without the proper license. The term “mais-valerá” is a novelty of LC 192/2018, as it is also expected to regulate additions on real estate that are still under construction.

The new legislation makes it possible to legalize modifications and/or additions to constructions done irregularly, that is, without proper authorization, by means of payment of a sum to the municipality. The alteration and/or addition shall be accepted provided that (i) the construction does not exceed more than one floor in addition to the plan permitted for the property and its respective approved plan and (ii) does not constitute use in disagreement with what is allowed for the property.

The “mais-valia” also allows the closing of balconies, both at the front and back of properties. In this case, the rate charged by the city government is proportional to the area of ​​the enclosed space, calculated based on the appraised value of the property for the purposes of calculating the Urban Property Tax (IPTU) and based on the purpose of the property, whether residential or commercial. The closing of balconies with so-called "glass curtains" will be exempted from the payment of the fee due to the provisions of the Municipal Complementary Law No. 145/2014, amended by Municipal Complementary Law No. 184/2018.

The “mais-valerá”, in turn, allows horizontal enlargements under the roof, provided that it is within construction standards. For commercial buildings, LC 192/2018 provides conditions for mezzanine construction of up to 50% of the floor area on the floors above the first floor, which was only allowed in shops on the ground floor. This change will be allowed throughout the city, including in the South Zone.

Interested parties will have 90 days to legalize their projects (extendable for the same period) as of the publication of the law. Those who adhere to project within 30 days from the date of entry into force of the law (July 19, 2018) will have a 5% discount on the tax due. If the fee is paid in cash, there will be a further 7% discount. Only those taxpayers who are in good standing with their tax obligations with the municipality may join this benefit of the new legalization.

According to the decree regulating LC No. 192/2018 (Municipal Decree No. 44.737/2018), the concession of the license for the execution of construction of the “mais-valerá” is conditioned on the payment of the first installment of the sum. A possible extension of this license is conditioned on the payment of the other installments. The concession of the legalization license of construction works already executed, in turn, depends on full payment of the sum.

Applications must be submitted through the online application system of the Municipal Department of Urbanism (SMU), available at: http://www.rio.rj.gov.br/web/maisvalia/requerimento-online.

Then, the applicant must deliver in one of the units of the SMU the printed application, the architecture plans, and other documents necessary to prepare the fee counterpart report.

Category: Infrastructure and energy

Presidential Decree (MP) No. 845/18, published on July 20, established the National Railway Development Fund (FNDF), with the objective of allocating resources to the national railway system. The FNDF will give priority to the implementation of the stretch between the Port of Vila do Conde in Pará and the North-South Track (EF-151 or FNS). The investments will start in the municipality of Barcarena/PA, per the terms of article 3 of MP 845/18.

Among the sources of income for the FNDF are funds received from the granting of the FNS sub-concession for the strech between the National Port in the State of Tocantins and the municipality of Estrela D'Oeste in the State of São Paulo.

Although MP 845/18 referred only to the granting of the FNS sub-concession, instead of having generically indicated any and all railway concessions and sub-concessions, the solution found by the government releases funds from the concessions of the other railway stretches for other purposes.

If we analyze other regulated sectors, as in the case of telecommunications, we will note that industry funds^[1] have already been created without the funds linked to them being effectively used, as has been proposed by the Federal Accounting Court (TCU), for example in appellate decision No. 749/2017 - en banc, in which Justice Bruno Dantas drafted the written opinion. In any case, since the government has already prioritized the construction of the port of Vila do Conde, in Pará, over the FNS, the selection criterion tends to ensure, even if not entirety, its effective use in that stretch.

Pursuant to the terms of article 8 of Law No. 11,297/06, the construction, use, and enjoyment of the FNS was assigned to Valec Engenharia, Construções e Ferrovias S.A. Since MP 845/18 did not change these assignments to Valec and since this entity has the legal nature of a public company, and therefore with its own legal personality, one asks how the relationship between the FNDF and Valec will proceed. This matter may be addressed in the regulation to be issued, since the presidential decree did not govern under what guise the FNDF’s budget will be used by Valec.

The role of the FNDF in the current public policy for the rail sector remains clear: the objective is not only to collect grants in order to offset the investments already made, but also to provide resources for new and strategic rail stretches according to the National Logistics Plan (NLP). The prioritization contributes to directing, without eliminating, the field of action of administrative discretion in the expansion of installed rail transport capacity in Brazil.

Category: Compliance, investigations and corporate governance

The Brazilian Clean Company Act or the Anti-Corruption Law (No. 12,846/2013) became noteworthy due to the creation of a normative framework that allows for punishment of companies for acts of corruption carried out on their behalf or benefit. Following market trends and global best practices, the same law also established an incentive to create and implement integrity (or compliance) programs within companies.

Although these initiatives are not mandatory, since the Anti-Corruption Law does not provide sanctions for companies that fail to implement integrity programs, it is notable that they are increasingly receiving the attention and resources of corporations as mechanisms to mitigate risks and assist in the fulfillment of officers and directors’ diligence duty.

There are, however, exceptions to the optional nature of integrity programs given by the Anti-Corruption Law. Some laws require companies under special circumstances to adopt elements of these programs. An example are the financial institutions subject to the regulation of the Brazilian Central Bank (“Bacen”). Resolution No. 4,595/2017, issued by Bacen, regulates the integrity policies applicable to such institutions, as well as other institutions authorized to operate by Bacen.

Publicly-held companies that qualify as category "A" issuers are also subject to a degree of this obligation. Instruction No. 480 of the Brazilian Securities and Exchange Commission replicates the integrity directions of the Brazilian Code of Corporate Governance (in Portuguese, Código Brasileiro de Governança Corporativa) in recommending the implementation of a code of conduct and a whistleblower channel for complaints and the existence of an independent and autonomous conduct committee. The Instruction, of course, does not demand complete fulfillment, but follows the "comply or explain" model, thus forcing issuers to report whether they follow each recommended practice and, if not, to explain.

Public companies, government-controlled companies, and other entities subject to the Brazilian State-Owned Companies Law (Federal Law No. 13,303/2016) are bound by corporate governance rules and compliance practices, mainly regarding the hiring and the relations with the general external public. Among the obligatory initiatives is the preparation and dissemination of a code of conduct and integrity that provides for, for example, whistleblower channels and sanctions applicable in the event of violation of the code’s rules.

In addition to these companies, there is an increasing group of corporations that are forced to implement integrity programs in order to maintain or enter into contracts with some bodies of the public administration, which is why there is a higher number of public entities that require the implementation of compliance programs by their suppliers.

Relevant examples are the state of Rio de Janeiro and the Federal District, where the implementation of an effective integrity program is already provided for in specific legislation as a fundamental requirement for contracting with the public administration.

Laws No. 7,753, enacted in October of 2017 by the state of Rio de Janeiro, and No. 6,112, enacted in February of 2018 by the government of the Federal District, provide for the requirement of an integrity program for companies that contract with the public administration. For Rio de Janeiro, the obligation applies to contracts with values that exceed the amounts determined by law for competitive bidding modalities^[1], and, for the Federal District, the obligation applies to contracts with values ​​equal to or greater than that of the best price bidding modality^[2].

Both laws provide for monetary sanctions (between 0.1% and 0.2% per day over the value of the contract) applicable to companies that do not comply with the requirement of implementation of an integrity program. The companies are also prevented from entering into contracts with the public administration for a period of two years, for the Federal District, or until the situation is regularized, for Rio de Janeiro.

In addition, Espírito Santo, through Law No. 10,793, of December 2017, required its suppliers of goods and services to have a code of conduct and integrity aimed at observing ethical principles.

Companies that are also interested in entering into contracts with some entities at the federal level are forced to implement integrity programs. An example of this is Petrobras, which included in its contracting process an integrity diligence phase, according to which suppliers must demonstrate the existence of an integrity program upon registering, renewing, or reclassifying their registrations. Based on this and other information, the state-owned company assigns an integrity risk grade, which is considered in the selection of companies that participate in its bidding processes.

The Brazilian Ministry of Agriculture, Livestock, and Food Supply, in turn, through Ordinance No. 877/18, created the obligation to implement risk management procedures, a whistleblower channel, a code of conduct and integrity policies for companies that enter into contracts with the body in amounts equal to or greater than R$ 5 million.

It is concluded, therefore, that what was considered a good practice recommended in the text of Law No. 12,846/13 has been increasingly transformed into a legal or business obligation. This suggests that companies of all sizes may need to adopt, in the medium term, at least some elements of an integrity program.

[2] Estimated between R$ 80,000 and R$ 650,000, although in the form of an electronic auction.

Category: Environmental

Two new regulations issued by the Brazilian Institute of the Environment and Renewable Natural Resources (“Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis” - IBAMA) regulate the Federal Technical Register of Potentially Pollution Activities (CTF/APP). Effective as of June 29, IN No. 11/2018 and IN No. 12/2018 have brought about significant changes in the framework of activities subject to registration with the CTF/APP, unlike previous Ibama instructions published on the subject.

IN No. 11/2018, for example, consolidated all the information related to the subject and included, in its Annex I, a list of activities subject to registration with the CTF. They were divided into two categories: (i) those provided for in Federal Law No. 6,938/1981 (the National Environmental Policy); and (ii) those provided for in other federal regulations.

With this, the analysis of activities subject to registration became faster and more efficient, and offers greater certainty to entrepreneurs, since all the activities that are subject to registration are listed in a single rule. For the most part, they underwent only modifications in their descriptions, which are now more detailed and specific and with reference to rules related to each one of the subjects.

Other relevant changes brought about by the rule are provided for in articles 10, 10-A, and 10-B. The provisions broaden the understanding that only undertakings in the operating phase would be subject to registration with the CTF, therein establishing the obligation of registration for projects that carry out activities subject to environmental control and inspection, which have an Installation License (LI) or other licenses or authorizations (which are also considered as environmental control and inspection actions). This rule includes activities set forth in technical conditions for environmental licenses or authorizations. Thus, even if the main licensed activity is not subject to registration with the CTF, if any of the technical conditions includes one of the activities listed in Annex I of IN No. 11/2018, enrollment with the CTF should be performed.

The articles mentioned make it clear that not only the licensee but also a third party carrying out the activities set forth therein (and listed in Annex I) must be registered with the CTF. In addition, entrepreneurs must register all activities that are required to be registered with the CTF developed in their establishment, and not only those stated in their corporate purpose or in the National Register of Corporate Taxpayers (CNPJ).

Thus, in general terms, Ibama IN No. 11/2018 clarifies some important concepts and obligations that were not explicit in the previous rules and extends the cases giving rise to an obligation to effect registration with the CTF. IN No. 12/2018, in turn, was responsible for creating a specific regulation for the classification of activities with the CTF.

The rule established criteria not only normative (as had been happening) but also technical standards to classify the activities subject to registration with the CTF. Therefore, in addition to the list in Annex I of IN No. 11/2018, the IN provided for the use of the Technical Classification Form (FTE) as a guide in describing the activities of the CTF.

The FTE consists of an electronic form that contains detailed descriptions for classifying activities. Each of the activities listed in Annex I has a corresponding FTE.

This may have been the greatest benefit for entrepreneurs brought about by the new INs, since the FTE can resolve most of the uncertainties regarding the activities registrable and non-registrable with the CTF and, therefore, avoid mistaken registrations that may generate undue costs arising from the quarterly payment of the Environmental Control and Inspection Fee (TCFA).

The rule also provided a glossary with definitions of various concepts mentioned in both Annex I of IN 11/2018 and in the FTEs, thus creating a useful consultation tool for entrepreneurs upon registering activities.

In view of the recent entry into force of the rules, it remains to be seen how the new provisions will be applied in practice and whether Ibama will propose in the coming months new regulations directed to the payment of the TCFA, since the subject has not been addressed in the rules recently published.

Category: Tax

The Federal Supreme Court (STF) recognized the constitutionality of the Social Contribution on Net Income (CSLL) on July 1, 1992, by means of the decision rendered in RE No. 138.284/CE. This position was confirmed in a consolidated manner in ADI No. 15/DF, decided on June 14, 2007. Since then, however, there has been a controversy over the effects of the decision by the STF for taxpayers who have in their favor a final and unappealable decision that affirmed the unconstitutionality of the rule. It is not clear, in this case, whether there would be a cut-off date for the application of the judicial decisions and, if so, what the date would be. All this has generated doubts in assessments of taxpayers and the Brazilian Federal Revenue Service.

There are, at the moment, recognized general repercussions that could, in theory, remedy these doubts. First, RE 949297, topic 881,^[1] is already released for judgment, but without moves towards its effective inclusion on the Court’s schedule for decisions. In an earlier stage, RE 955227, topic 885,^[2] is not yet released for judgment.^[3]

If, on the one hand, it is not possible to be sure of the STF’s position on the topic at the moment, there is a decision by the STJ that, in principle, could resolve the issue. As well delimited in the judgment in the systematic framework of repetitive appeals, it was ruled in REsp No. 1,118,893/MG that "the fact that the Federal Supreme Court subsequently rules in the opposite direction to the final and unappealable judicial decision cannot change the legal relationship stabilized by res judicata, under penalty of denying validity to the diffuse control of constitutionality."

It so happens that the application of repetitive cases has been controversial. The Administrative Council of Tax Appeals (Carf), through the Superior Chamber of Tax Appeals, is the last administrative body that carries out an analysis of tax matters in the context of the Federal Government. The body analyzed various cases in which the CSLL tax is discussed in the terms above. Since April of 2016, the case law has been converging to the effect that the decision reached in REsp No. 1.118.893/MG does not have the power to vacate certain assessments made. We shall explain.

The position presented by the taxpayer, both in administrative and judicial terms, is based mainly on the effects of res judicata and on the principle of legal certainty. Reaffirming what was stated by the STJ in REsp No. 1.118.893/MG, subsequent decisions issued by the STF would not have the power to change the individual res judicata of the taxpayer, especially in cases in which the review period by means of an action for relief from the judgment has closed.

Countering the main arguments by the Federal Tax Authority, the taxpayer is of the position that STF Precedent No. 239,^[4] upon analyzing the legal context at the time of its issuance, focused on repressive actions against specific charges, not actions that sought to confirm the non-existence of a legal relationship, and the latter are much more comprehensive than the former. In addition, subsequent amendments to the laws governing the CSLL do not constitute substantial changes in the legislation analyzed in the individual suit. In this sense, the "rule of law" on which the analysis of the unconstitutionality of the tax was carried out remains unchanged.

On the other hand, the position of the Office of the General Counsel for The Federal Treasury (PGFN) is essentially based on the logical construction of PGFN/CRJ Opinion No. 492/2011. According to the analysis contained in the opinion, the case law of the STF leads to the understanding that there should be a softening of res judicata for future events, when this contrasts with an understanding later issued by the STF in an "objective and definitive" precedent with binding effect. The justification for this softening for future events is in particular deference to the principle of equal protection and free competition, to avoid a disparity between taxpayers ad aeternum.

In the specific case of the CSLL, there is supposedly a change in the factual scenario of the final decisions, most of them obtained during the 1990s, in relation to the scenario with respect to which the constitutional review was conducted in No. ADI 15/DF, decided only in 2007, in view of subsequent legislative changes. This modification would supposedly justify that the res judicata obtained did not cover later years.

Thus, one should not speak of an offense to res judicata. It would cover only the period up to the subsequent legislative changes, and they would be respected in their entirety. In this same sense, REsp No. 1.118.893/MG supposedly analyzed the CSLL only in its wording with the changes until 1992. Its application is not subject to the period of the amendments from 1995 onwards.

Administratively, Carf's Superior Court of Tax Appeals analyzed the matter and decided it was possible to collect the CSLL,^[5] even when the taxpayer obtained a favorable final and unappealable decision. In such cases, periods prior to the decree of unconstitutionality by the STF in ADI No. 15/2007 were reviewed, therein making reference to the judgment of RE No. 138.284/CE, of 1992, by the STF.

According to the current administrative position, it is supposedly possible to collect the CSLL for events after 1995, in spite of the final and unappealable individual decision. On the other hand, based on the understanding defended by the taxpayer, the position presented in REsp No. 1.118.893/MG guarantees the right to not collect the tax until the present moment.

The current upheaval is due to the lack of a settled position and invariably leads to legal uncertainty for taxpayers. It is hoped that the STF, upon reviewing the discussion, will take both arguments into account and will be able to determine an effective resolution for the specific cases, thus clarifying the existing divergence.

[2] 885 - Effects of the decisions of the Federal Supreme Court on diffuse constitutionality control over res judicata formed in ongoing tax relations.

[3] In view of the order to suspend the progress in all cases dealing with topics 881 and 885, the recent decisions of the STJ are to the effect of staying the matters, as done for example in ERESP No. 841.818 and EAg No. 991.788.

[4] Decision declaring the collection of the tax undue in a given year does not constitute res judicata in relation to subsequent collection actions.

[5] Recent references, appellate decisions 9101-003.531, 9101-003.472, and 9101-003.496

Category: Labor and employment

Recent news articles published on the internet have raised doubts among companies about the obligation under the Consolidated Labor Laws (CLT) to extend maternity leave of employees in the event of hospitalization of the newborn, but in fact they referred to decisions rendered in favor of public servants, and not employees covered by the CLT.

In one of the cases, the public servant of the Federal District filed a lawsuit in the Civil Court alleging that, due to complications at childbirth, her daughter had to be hospitalized for a period of three months and twenty-one days in a neonatal ICU and that she needed full-time care from her mother. Cohabitation with the mother during the first months of life was therefore alleged to be fundamental to ensure the physical, psychological, and emotional development of the child, which had not been possible during the period in which she was hospitalized in the ICU due to health problems.

The Second District Court of the Special Courts of the Federal District granted the claim of the public servant and ordered the Federal District to count as beginning of the maternity leave only the time of discharge of the newborn from the ICU. In addition, the period of hospitalization should be considered paid leave to care for a sick child.

This decision and similar ones do not apply to employees governed by the CLT, since they were based on complementary laws that set forth the legal framework for public civil servants, which, for the most part, provide for the possibility of paid leave to care for sick family members.

Thus, although the decisions issued take into account the principle of the best interests of the child, there is no way to grant such an extension to employees governed by the CLT, since there is no possibility of extension of maternity leave or provision of paid leave to care for a sick family member in the labor and social security laws applicable under the CLT.

In other words, if the situation of the public servant in the Federal District occurred with an employee with a private employer, there would be no way to delay the beginning of maternity leave. This is because, under the provisions of the Federal Constitution, the maternity leave period under the CLT is 120 days, and may be extended for another 60 days only if the employer has joined the Citizen Company Program, under the terms of Law No. 11,770/2008. It is also possible to extend the period of rest before or after delivery for up to two weeks, in exceptional cases, upon delivery of a specific medical affidavit, provided for in article 93, paragraph 3 of Decree 3,048/1999.

What currently exists for employees under the CLT is a proposal for an Amendment to the Federal Constitution (99/2015),^[1] already approved by the plenary session of the Senate and in progress before the Chamber of Deputies. The objective is to amend item XVII of article 7 of the Federal Constitution to provide for the possibility of extending maternity leave for employees under the CLT in the event of premature birth due to the number of days the newborn is hospitalized.

It is worth noting that the content of the decision handed down in favor of public servants demonstrates the growing awareness of the real purpose of maternity, or paternity, leave which would be the need for the presence of the parents during the first weeks of the baby's life.

However, until the proposal for Amendment to the Federal Constitution No. 99/2015 is approved, there is no provision that provides for and regulates extension of maternity leave for employees of private companies, and there is no way to use the decisions rendered in favor of public servants as a paradigm for private sector workers.

Thus, for now, private companies are not obliged to extend maternity leave in the event of hospitalization of newborns.