Publications
- Category: Tax
Considering the changes made, ICMS Convention No. 190/17 will become effective with the following deadlines to be observed by the states and ICMS taxpayers:
December 28th, 2018 - for publication of normative acts not in force on August 8th, 2017.
July 31st, 2019 - for Confaz to be able to postpone, in specific cases and subject to the quorum of a simple majority, the compliance with the requirement of publication of the previous normative acts. The request by the applicant state must be accompanied by an identification of the normative acts covered by the application, as indicated in the model contained in the Sole Annex to ICMS Convention No. 190/17.
August 31st, 2018 - for registration and deposit in Confaz of the acts in force on the date of registration and deposit.
July 31st, 2019 - for registration and deposit in Confaz of acts not in force on August 8th, 2017.
December 27th, 2019 - for Confaz to be able to postpone, in specific cases and subject to the quorum of a simple majority, the compliance with the registration and deposit of the previous acts. The request by the applicant state must be accompanied by supporting documentation that is related to the acts granting the tax benefits.
ICMS Convention No. 51/18 also validates acts of registration and deposit made in the period from June 30th, 2018 until the date of its entry into force.
The seventh section of ICMS Convention No. 190/17 was also amended to exclude the obligation of states to provide information and documents related to operations and installments provided by tax benefits, as well as the economic segment, activity, merchandise or service whose tax benefit was provided (respectively, items XII and XIII of the original version of the ICMS Convention No. 190/17).
- Category: Labor and employment
The National Congress has the prerogative of disciplining legal relations arising from Presidential Decree No. 808/2017 by means of a legislative decree. If a decree is not published, the legal relationships established and arising from acts performed during the validity of Presidential Decree No. 808/2017 will continue to be governed by it.
However, on April 23, 2018, due to the loss of effectiveness of the Decree, the text of the Labor Reform approved in 2017 by the National Congress came back to full force.
DOWNLOAD A TABLE COMPARING THE MAIN POINTS AMENDED BY THE LABOR REFORM
- Category: Labor and employment
Since the Labor Reform came into force in November of 2017, the number of lawsuits filed with the Labor Courts to question the mandatory discounting of union contributions has almost tripled. Between December of 2017 and May of 2018, according to information released by the Superior Labor Court (TST), 15,551 actions involving union contribution were filed. The amount is 161% higher than in the period from December of 2016 to May of 2017, when 5,941 suits were filed on the subject.[1]
On June 29, however, the Federal Supreme Court settled the legal uncertainty regarding the subject and understood the constitutionality of the changes that made the union contribution optional.
The decision was reached during the judgment of Direct Action of Unconstitutionality (ADI) 5.794 - filed by the National Confederation of Workers in Waterway and Air Transport, Fishing and Ports (Conttmaf) on October 16, 2017 - of the Declaratory Action of Constitutionality (ADC) 55, and of eighteen other ADIs with the same subject-matter.
In ADI 5,794, Conttmaf requested the declaration of unconstitutionality of article 1 of Law No. 13,467/17, which amended the rules set forth in articles 545, 578, 579, 582, 583, 587, and 602 of the Consolidated Labor Laws (CLT), thus making union contributions optional and making their payment conditioned on the express authorization of the workers.
ADC 55 was filed by the Brazilian Association of Radio and TV Broadcasters (Abert) on May 29, 2018, and defended the constitutionality of the changes promoted by the Labor Reform regarding the end of the mandatory payment of union contributions.
The judge who drafted the opinion on ADI 5,794, Justice Edson Fachin, opined that the action to declare the formal and substantive unconstitutionality of the legislative amendment that made it optional to collect union contributions was valid. He based his decision on four main arguments:
- Due to its tax nature, union contributions would be subject to a general rule of tax law. Thus, it would be necessary to enact a complementary law to change it, and the amendment promoted by ordinary law by the Labor Reform is not valid;
- The end of the mandatory payment of the union contributions would deinstitutionalize the main source of funding for trade unions;
- Due to the destination specified by law, already 10% of the amount collected is allocated to the Special Employment and Wage Account which is the basis of the FAT, the union contribution constitutes public revenue, which is why amendment of the legislation would violate article 113 of the ADCT and would imply tax waiver by the Federal Government; and
- The legislative amendment would cause the union framework recognized by the Federal Constitution of 1988, which prioritized full and compulsory trade union activity (union unity, mandatory representation, and funding of trade union units via a contribution of a tax nature), and would condemn the entities to bankruptcy due to lack of a source of funding.
Justice Luiz Fux dissented from the reporting judge and voted for the dismissal of the ADIs and for granting relief to the ADCs, due to the formal constitutionality of Law No. 13,467/17. In short, his arguments were that the union contribution is not a tax, since it does not contemplate general rules of tax law and, therefore, does not have to be changed by means of a complementary law. According to the justice, the rule that establishes the need for a specific law for cases of tax credit exclusion, established by article 150, paragraph 6, of the Federal Constitution of 1988, provides an exhaustive list that would not apply to this case.
Regarding the substantive constitutionality of the amendment promoted by the Labor Reform, Justice Luiz Fux was of the position that:
- there is no violation of the principle of tax isonomy, since the criterion is homogeneous and egalitarian as it requires the prior authorization of any or all workers in order to collect the union contribution;
- since it is not a tax, the rules on limitations on the power to tax would be excluded;
- the lack of a constitutional provision for compulsory contribution is the cause of the proliferation of trade union entities in Brazil, which was supposedly corrected by the ordinary legislator with the enactment of the Labor Reform; and
- the compulsory union contribution goes against the constitutional provision of freedom of association and expression.
In addition, regarding the effect of the decision on the financial health of trade unions, the justice argued that unions have various forms of funding, such as the contributions provided in assemblies of the category of workers or in collective bargaining agreements, confederation contributions, and assistance contributions provided for in article 513-E of the Consolidated Labor Laws.
Justices Rosa Weber and Dias Toffoli concurred with the opinion by the reporting judge. Justice Rosa Weber based her vote that the ADIs were valid on the existence of a hybrid nature of the Brazilian trade union system (union unity versus freedom of association) and on the damage to the performance and existence of unions, which would weaken the defense of workers' rights and interests.
Justice Dias Toffoli emphasized the tax and compulsory nature of union contributions and voted to grant relief to the prayers for relief lodged in the ADIs so as to declare the unconstitutionality of the provisions questioned.
They accompanied the dissent raised by Justice Luiz Fux, Justices Alexandre de Moraes, Luís Roberto Barroso, Marco Aurélio Mello, Gilmar Mendes, and Carmen Lúcia, who voted for dismissal of the ADIs and the constitutionality of the Labor Reform in relation to the optional nature of the union contribution.
In his vote, Justice Alexandre de Moraes prioritized the application of the principles of freedom of union association and individual freedom of association and highlighted the existence of a trade union representation deficit in the country, noting that Brazil has more than 16,000 unions and that only 20% of workers are unionized. He added that this stems from the fact that compulsory union contributions are very comfortable for trade unions, which should seek greater representativeness.
Justice Luís Roberto Barroso highlighted the application of the associative union system permeated by freedom of association, and workers can choose whether or not to associate or not to contribute to unions. Justices Barroso and Fux cited in their votes ADI No. 5,522, the objective of which was to declare unconstitutional the rule set forth in article 47 of the Statute of the Brazilian Bar Association, and which was dismissed, thus exempting attorneys from the union contribution due to the fact that they already contribute to the Brazilian Bar Association (OAB).
Justice Marco Aurélio Mello stressed that union contributions do not have the nature of a tax and that the declaration of constitutionality of the change promoted by Law 13,467/2017 would encourage unions to be more efficient and have more members. Justice Gilmar Mendes highlighted the model of free union association elected by the Federal Constitution and that the amendment does not seek the abolition of unions, but only their self-financing and greater efficiency.
With the opinion of Justice Carmen Lúcia, the STF en banc, by a majority vote (6x3), ruled constitutional the changes promoted by Law No. 13,467/2017, which made union contributions optional.
- Category: Banking, insurance and finance
Legal entities and investment funds incorporated in Brazil must submit a report to the Central Bank of Brazil, detailing investments in their quotas and/or shares held by foreign investors, or the outstanding short-term trade debts owed to non-residents, on December 31 of the previous fiscal year, in the following situations:
(a) legal entities must submit this report when, on December 31, 2017, they had a net worth equivalent to or in excess of one hundred million US dollars (USD 100,000,000.00), and, simultaneously, any direct ownership held by non-resident investors in their capital stock, regardless of the amount;
(b) legal entities must submit a report with respect to their current liabilities with non-resident lenders by means of debt instruments when, on December 31, 2017, they had an outstanding balance in short-term trade debts (due within 360 days) equivalent to or in excess of ten million US dollars (USD 10,000,000.00), regardless of any foreign equity ownership in their capital stock; and
(c) investment funds must submit a report when, on December 31, 2017, they had a net worth equivalent to or in excess of one hundred million US dollars (USD 100,000,000.00) and, simultaneously, quotas directly held by non-resident investors, regardless of the amount.
The reporting obligation mentioned above does not apply to the following persons and administrative bodies:
(a) individuals;
(b) direct administrative bodies of federal, state, Federal District, and municipal governments;
(c) legal entities who are debtors in the transfer of foreign loans granted by institutions headquartered in Brazil; and
(d) nonprofit entities maintained by the contributions of non-residents.
The report must be electronically submitted to the Central Bank through the website www.bcb.gov.br between July 2, 2018 and 6 PM on August 15, 2018.
The manual containing detailed information on the content and requirements of the report is available on the same website.
Those responsible for this report must store the supporting documentation for a period of five (5) years, counted as of the base date of the report, available for submission to the Central Bank upon request.
Failure to submit the report, or submitting a report that does not comply with the applicable regulations, subjects the violator to a fine of up to two hundred and fifty thousand Brazilian Reais (R$250,000.00), pursuant to article 60 of BCB Circular No. 3,857, of November 14, 2017.
(BCB Circular No. 3,795, of June 16, 2016, Law No. 13,506, of November 13, 2017; and BCB Circular No. 3,857, of November 14, 2017).
- Category: Intellectual property
The plenary session of the Senate approved on Tuesday, July 10, Bill of Law (PLC) No. 53/2018, which deals with the protection of personal data. The text is now proceeding for signature by the president of Brazil and, if signed, Brazil will have a data protection law in force 18 months after its publication in the Official Gazette.
Waited for a long time, the new law will put Brazil at a level similar to that of developed countries. We highlight below some points of the new legislation.
Main concepts employed, which deal with the scope of application of the rules and the individuals and legal entities covered by the new framework:
Personal data: any information related to an individual (a natural person) that can be identified based on the data collected. This is the central concept of the new legislation whose purpose is to protect the privacy of owners of personal data that is being processed.
Data subject: an individual (natural person) to whom the personal data subject to processing refers.
Processing: is any operation performed with personal data, such as collection, use, processing, storage, and deletion.
Controller: an individual or legal entity responsible for decisions concerning the processing of personal data.
Application: the new legislation applies to individuals or legal entities, private or government entities, who process personal data in Brazil or collect data in Brazil or, further, when the processing has the purpose of offering or supplying goods or services to data subjects located in Brazil.
Scenarios for processing: the processing of personal data can only be carried out in one of the following scenarios: (a) based on the consent of the data subject of the personal data; (b) when it occurs to fulfill a legal or regulatory obligation on the part of the controller; (c) by the public administration, for the execution of public policies; (d) by research bodies, to carry out studies; (e) where necessary for performance under a contract or preliminary procedures for a contract to which the data subject is a party, at the request of the data subject; (f) for the regular exercise of rights in judicial, administrative, or arbitration proceedings; (g) for the protection of the life or physical safety of the data subject or a third party; (h) for protection of health, with procedures performed by health professionals or by health entities; (i) when necessary to meet the legitimate interests of the controller or a third party, except in the event that the fundamental rights and freedoms of the data subject of the personal data that require the protection of personal data prevail; or (j) for the protection of a debt claim.
Children and adolescents: In the case of processing of personal data of children and adolescents, there should be specific and clear consent given by at least one parent or legal guardian.
Rights of data subjects: the new legislation establishes the following rights of data subjects: (a) to obtain information about the existence of processing of their personal data; (b) to access their personal data; (c) to correct incomplete, inaccurate, or outdated personal data; (d) to have unnecessary or excessive personal data or personal data processed in contravention of the legislation anonymized, blocked, or deleted; (e) to carry out portability of personal data to another provider of a service or product (that is, to have someone who holds their personal data transfer it to a third party, at the request of the data subject); (f) to delete their personal data processed on the basis of their consent (that is, the right to revoke their consent given earlier); (g) to obtain information on the public and private entities with which the controller has shared the data subjects' personal data; and (h) to obtain information about the possibility of not giving consent to the processing of their personal data and the consequences of such denial.
International transfer of data: the transfer of personal data outside the territorial limits of Brazil shall be allowed only in the cases provided for by law, including: (i) to countries that provide a degree of protection of personal data equal to that provided for by Brazilian law; (ii) when the transfer is necessary for the protection of the life or physical safety of the data subject or a third party; or (iii) when the data subject has given specific and clear consent to the transfer. Accordingly, controllers should take extra precautions when they transfer personal data, including upon hiring IT service providers who may store data in other countries and thus may violate the rules governing international transfer of data.
Person responsible for the processing of personal data: controllers must appoint a person responsible for the processing of personal data, whose main functions shall be to respond to complaints and requests from data subjects; to receive communications from the national data protection authority (described below); and to take the steps necessary, as well as to guide employees and contractors regarding practices related to the protection of personal data.
Penalties: Among other penalties, the law provides for penalties of up to 2% of the billing of the private legal entity, group, or conglomerate in Brazil in its last fiscal year, excluding taxes and limited to a total of R$ 50 million per infraction. Following the model of the European General Data Protection Regulation (GDPR), the new legislation established fairly stringent penalties, which emphasize the importance of the subject.
Creation of a National Data Protection Authority: The law creates the National Data Protection Authority, whose main function shall be to protect personal data.
In the coming months, people who process personal data subject to the new law, especially Brazilian companies, should take a number of measures to ensure compliance with the new legislation. These include the implementation of appropriate corporate policies, the hiring of information technology resources, and the training of personnel both to respect the rights of personal data subjects (usually customers, employees, and other contractors) and to avoid the penalties provided for.
- Category: Real estate
The Special Body of the São Paulo State Court of Appeals (TJSP) amended a preliminary injunction that had suspended the effects of article 162 of Municipal Law No. 16,402/14 (São Paulo’s Land Subdividing, Use, and Occupancy Law) and restrained almost two thousand cases of licensing for construction projects, activities, and buildings filed under the previous legislation, which caused serious and irreparable harm to the city’s economy and to the industry’s legal certainty. With the decision by the Special Body, the more than 1,900 cases found in this situation (according to the city government, and disregarding those currently being examined by the regional city governments and departments) can resume their normal progress immediately.
Although preliminary, the decision represents a relief for the real estate market, which was experiencing a situation of uncertainty and legal insecurity since February of this year, after a preliminary injunction was granted in a Direct Action of Unconstitutionality (ADIn) brought by the Public Prosecutor of the State of São Paulo by its Attorney General, so as to declare the incompatibility of the so-called "right of filing" with São Paulo´s State Constitution. Set forth in article 162 of Municipal Law No. 16,402/16, the right of filing guarantees that construction license applications will be subject to the legislation in force on the date of their filing with the Municipality of São Paulo, even if supervening laws modify the rules applicable to the land. The contested legal provision aimed precisely at avoiding the frequent conflicts involving the effectiveness of a new law and the validity of the legal relations previous established. It is therefore an example of a rule of transition, with the primary purpose of providing legal certainty and stability for the relations between private individuals and the Public Power.
Grounds for the petition
For the Public Prosecutor's Office, article 162 conflicts with the fundamental right to an ecologically balanced environment, provided for in the Federal Constitution (article 225, paragraph 1, item III), and with the principle of the prohibition of social and environmental retrogression established in the State Constitution (articles 111, 144, 180, items III, IV, and V, 191, 192, and 196). Therefore, the maintenance of the right of filing in Special Environmental Protection Areas would cause individual and private interests to prevail over environmental protection.
In spite of this reasoning, in the order granting the preliminary injunction, Judge Evaristo dos Santos did not make reference to the comprehensiveness of such measure, whether it applies only to lands included in Zepam (Special Environmental Protection Zone), with respect to which the Public Prosecutor’s Office alleges current zoning law should prevail, or whether it is indiscriminately applicable to the more than 1,900 administrative licensing cases filed with São Paulo´s City Government by the date of publication of Municipal Law No. 16,402/16 that have not yet been decided. As a direct result of this decision, the São Paulo City Government had paused all of these proceedings precisely because of the uncertainties arising from the concession of the preliminary injunction.
The petition also appears to have the pretext of curbing allegedly abusive conduct by certain players in the real estate market regarding the right of filing. The Public Prosecutor's Office made indiscriminate use of a legal instrument effective against all, namely the Direct Action of Unconstitutionality, which, in the event it is granted the relief sought, will cause harm even to those who exercised the right of filing in good faith under the purview of a legitimate expectation, and those who acquired the right to have their projects reviewed according to the law in force at the time of the filing (under a presumption of constitutionality), which had never before been challenged .
If existing legislation and case law on the subject were not enough, which restrict the cases in which the right of filing is applicable precisely to prevent its abusive use, the fight against alleged abusive conduct must be done on a case-by-case basis, taking into account individual circumstances, since, otherwise, all those who have legitimately exercised the right of filing will be penalized without differentiation. There is no past unconstitutionality of filings submitted in a lawful manner and pursuant to the legislation then in force. To admit what the Public Prosecutor's Office alleges in this action is to ignore an accrued right and to disregard legal certainty, which cannot be admitted under the rule of law.
The effects of the decision
The written opinion of the winning vote was brief and objective, ruling out from the present case the necessary, essential, and cumulative requirements that legitimize the granting of an injunction, since it found that periculum in mora [danger in delay] was absent since the zoning law had been promulgated in March of 2016, which, therefore, had been more than one year and one day prior.
Although the decision was reviewed in a summary and non-exhaustive manner, the Special Body did, to some extent, anticipate a discussion of the merits, which may be indicative of its position in this regard. In this sense, the prevailing opinion that granted relief to the appeal highlighted that, at the moment, it could not be assumed that filings submitted before Municipal Law No. 16,402/16 was enacted, carried out in accordance with the now repealed municipal legislation, contained an error of unconstitutionality. For that reason, it was understood that the restriction imposed as a result of the suspension of the right of filing was disproportionate, to the detriment of legal certainty and the protection of the legitimate expectations of the parties affected.
Even if this preliminary indication is not confirmed in a final decision on the merits and the TJSP, contrary to what was indicated by the Special Body, decides to rule article 162 unconstitutional, any decision that accepts the Public Prosecutor’s prayers for relief in the scope of the Direct Suit of Unconstitutionality will have to properly modulate the effects of the suspension of the right of filing as a result of the revocation of article 162. It will be necessary to consider its temporal aspects (ex tunc effects, that is, before the decision, or ex nunc, as of the decision) and the comprehensiveness of its scope with regard to the merits, as to its location (whether it will only cover projects located in environmental protection zones) and as to its different stages of the administrative licensing processes (only processes in their initial stage, without any decision issued, or also those that already have an approval certificate issued or even those that already have an occupancy permit and are in an advanced stage of construction, for example), for reasons of legal certainty and exceptional social interest.
Currently, the São Paulo Municipal Government has resumed its review of processes filed before the publication of Municipal Law No. 16,402/16, thus respecting the right of filing and applying the legislation in force at the time of the filing. However, it is expected that the reporting judge will continue the normal course of the suit and that the Public Prosecutor’s Office will file an appeal. Based on current indications, even due to an express demonstration by the Special Body itself in the decision that accepted the appeal, as well as dealing with an essentially legal matter, a final outcome for the Direct Suit of Unconstitutionality should not take long to come about, at least from the TJSP. It is worth remembering, however, that appeals to the higher courts may also be filed.