Publications

Category: Tax

In recent years, although the Superior Court of Justice (STJ) has established theories on the use of performance bonds or bank guarantee as security in tax litigation, taxpayers still face legal uncertainty regarding the effects of presenting judicial performance bonds and bank guarantee in tax foreclosures. The doubt arises especially regarding the possibility of a subsequent protest of the Outstanding Debt Certificate (CDA) and registration in the Informative Register of Unpaid Debts of the Federal Public Sector (Cadin).

In recent judgments, the 2nd Panel of the STJ^[1] has ruled that guarantees of tax executions by bond, bank guarantee, and/or real estate, by itself, does not legally prevent the protest and/or inclusion in Cadin, "unless, for another reason - as in the case of interim judicial relief (article 151, IV and V, of the CTN) -, the tax credit has its enforceability suspended."

Also in relation to the case law, we can mention the sole-judge decision of Justice Gurgel de Faria, according to which "the provision of a performance bond, although it authorizes the issuance of a Debt Certificate with Effects of Clearance (CPD-EN), is not a cause for suspension of enforceability of the tax credit and, therefore, does not prevent the tax authorities from proceeding with the protest of the CDA and from registering the debtor's name in a register of defaulters."

It is thus seen that the 2nd Panel of the STJ, whose understanding has been applied in sole-judge decisions by some justices who are part of the 1st panel,^[2] takes a position finding for the possibility of protesting the CDA, even in the event that the debt is guaranteed by a bond. The reasoning adopted is supported by the traditional case law that this type of guarantee does not suspend the enforceability of the tax debt.

In the opinion of the 2nd Panel of the Superior Court, suspension of the protest of an obligation described in an enforceable instrument and/or removal of the taxpayer from Cadin would be intrinsically linked to the express suspension of enforceability of the tax debt, provided for in article 151 of the National Tax Code (CTN). This measure would have the power to remove the situation of default for all purposes and allow the taxpayer to obtain tax clearance certificates, preventing its inclusion in Cadin and/or protest of the enforceable instrument.

This understanding impacts on taxpayers who intend to or already use performance bonds and/or bank guarantees for the purposes of guaranteeing tax foreclosures. In addition to bringing about serious implications for business activity, the position of the 2nd Panel of the STJ highlights the legal uncertainty that these taxpayers may face due to the divergent interpretations of the Judiciary on the effects of the attachment of these guarantees.

In practical terms, if the judge, when analyzing the guarantee offered, does not expressly mention suspension of the enforceability of the tax debt, the taxpayer may be surprised by the protest of the CDA or even by its registration in Cadin, even with the debt guaranteed by performance bond and/or bank guarantee.

If there is a suitable guarantee, the tax administration is fully protected in the event of success in the claim, which even hollows out - or should hollow out - its interest in adopting any other constrictive measures.

The protest of CDA and registration in registers of defaulters, therefore, in our view, represents another coercive means to collect the debt, which implies offense to the social function of the company, private property, good faith, and the principle of morality. They also offend the principles of reasonableness and proportionality, as well as the principle of least burdensomeness.

In addition, in view of the presentation of a suitable guarantee, there is no legal provision that the effects of suspension of enforceability of the tax debt are exclusive to the scenarios contained in the CTN.   There is no prejudice to the tax authorities, since the debt is fully secured.

Despite these precedents, the discussion is far from being closed, since there are strong arguments that support the impossibility of protesting the CDA and registration in Cadin, based on credit guaranteed by performance bond and/or bank guarantee. In any case, it is important to follow the position of the Judiciary, especially the future decisions of the STJ on the subject.

^[1] REsp 1.796.295/ES, REsp 1.775.749/SC, internal interlocutory appeal in the motion for clarification in REsp 2.001.275/PB.

^[2] Motion for clarification in REsp 1,923,413, REsp 1930057; REsp 1.930.057; and AREsp 2.159.394.

Category: Real estate

The new version of the Minha Casa, Minha Vida program, instituted by Executive Order 1,162/23 was recently regulated by Decree 11,439/23, replacing the Casa Verde e Amarela program established under the previous government.

The new program aims to serve up to two million families by 2026. Key objectives include:

• expand the supply of housing for low-income populations in urban and rural areas;
• resume and finalize the stopped works, with requalification of housing units currently irregular and use of public resources already invested; and
• support the sustainable development and modernization of the program, to expand its reach and increase the quality of production of new households.

One of the attractions for investors in the sector was the broadening of the target audience compared to previous parameters. The new Minha Casa, Minha Vida program will serve families living in urban areas with a gross monthly income of up to R$ 8,000^[1] and in rural areas with an annual gross income of up to R$ 96,000.^[2][3] Among the three urban bands, we highlight the increase in the gross family income ceiling of Urban Band 1 from R$ 1,800 to R$ 2,640, a significant increase of 47%. It is speculated that the government subsidy for Urban Band 1 will reach 95% of the property price.

Regarding the economic subsidy of the program, Ordinance 146/23 of the Ministry of Cities increased the previous limit as follows:

• R$ 140 thousand for operations with funds from the Residential Lease Fund (FAR) and the Social Development Fund (FDS); and
• R$ 60 thousand for operations of the National Rural Housing Program (PNHR).

The grant offered by the Federal Government will provide savings for construction companies on the commercial costs of a standard project. The new limits will include expenses for building, construction of a septic or wastewater treatment solution, implementation of technical assistance, social work, as well as amounts related to activities carried out by the operational manager and financial agent.

The new Minha Casa, Minha Vida program also provides, in addition to the sale, the possibility of assignment, rental, lease, and donation of housing units to beneficiary families and/or federal entities, whether or not financed. The transaction may be carried out under a subsidized or unsubsidized contract, in whole or in part, without prejudice to other compatible legal transactions, which enhances the range of real estate transactions available.

In order to give more agility and flexibility to operations carried out through the new program, the following amendments were made to Federal Law 6,015/73 (Public Records Law). With the change, for public registry purposes, it will no longer be necessary to have witnesses and notarize private contracts formulated by financial institutions that operate with real estate credit and are authorized to enter into private instruments with the nature of a public deed.

Law 14,382/22 has also been amended to allow electronic statements relating to real estate produced by financial institutions dealing in real estate credit to be submitted to the electronic real estate registry. These institutions will have the obligation to file the contractual instrument in a separate file, dispensing with intermediate agents and procedures. This makes real estate transactions less costly and more convenient.

The executive order will have until June 13, 2023, to be converted into law, which will depend on approval by the Chamber of Deputies. However, the rules that do not require subsequent regulations are already in force and effective. Although there are still rules to be defined and regulated, the possible impact for construction companies operating in this field is promising. It is worth monitoring possible updates in the coming weeks.

^[1] The following bands are considered for families living in urban areas: a) Urban Band 1 - gross monthly family income up to R$ 2,640; b) Urban Band 2 - gross monthly family income from R$ 2,640 to R$ 4,400; and c) Urban Band 3 - gross monthly family income from R$ 4,400.01 to R$ 8 thousand.

^[2] Families living in rural areas are considered to be the following: a) Rural Band 1 - annual gross family income up to R$ 31,680; b) Rural Band 2 - annual gross family income from R$ 31,680.01 to R$ 52,800; c) Rural Band 3 - annual gross family income from R$ 52,800.01 to R$ 96 thousand.

^[3] For the purposes of inclusion in the income brackets, the calculation of the gross family income value will not consider the temporary benefits of an indemnity, social assistance, or social security nature, such as sickness benefits, accident aid, unemployment insurance, Continuous Cash Benefit (BPC), and benefits of the Bolsa Família Program or others that may replace them.

Category: Capital markets

The CVM released on Wednesday, May 31, CVM Resolution 184/23, which implemented specific changes to CVM Resolution 175/22 (Regulatory Framework for Funds) and introduced nine new normative schedules referring to several categories of investment funds.

In addition to the general rule and the rules for FIFs (Normative Schedule I) and Credit Rights Investment Funds (FIDC) (Normative Schedule II), exhibits dealing with the following categories of investment funds have been included:

• Normative Schedule III: Real Estate Investment Funds (FII)
• Normative Schedule IV: Equity Investment Funds (FIP)
• Normative Schedule V: Market Index Investment Funds (ETF)
• Normative Schedule VII: Privatization Mutual Funds (FMP-FGTS)
• Normative Schedule VIII: National Film Industry Investment Funds (Funcine)
• Normative Schedule IX: Incentivized Equity Mutual Funds (FMAI)
• Normative Schedule X: Cultural and Artistic Investment Funds (Ficart)
• Normative Schedule XI: Welfare Funds
• Normative Schedule XII: Investment Funds in Credit Rights of Social Interest Projects (FIDC-PIPS)

Normative Schedule VI will be promulgated later and is reserved for the rule of the Fund for Investment in Agribusiness Production Chains (Fiagro).

It is worth noting that pension funds do not constitute a specific category of investment fund like the others, but their content has been addressed in a separate schedule to better systematize the rules.

CVM Resolution 184/23 brings in other adjustments to CVM Resolution 175/22, such as the obligation to disclose to shareholders the voting policy at meetings of securities holders. In addition, there was a textual refinement, replacing the term "socio-environmental" by "social, environmental, or governance". A section dedicated to individual planned retirement funds has also been added in the Financial Investment Funds (FIF) rule.

There was no need for a Regulatory Impact Analysis or public hearings on the new resolution, as the changes to the regulations were not substantial. The texts reflect the general rules contained in CVM Resolution 175 and were revised under Decree 10,139/19, which provides for revision and consolidation of all rules issued by the agency.

However, during the process of reviewing and consolidating the new regulatory schedules, opportunities for improvement were identified in the FII, FIP, and ETF rules. For this reason, the CVM reported that, as a next step, it intends to modernize the rules applicable to such funds, taking into account the suggestions received from market participants. The regulatory update of these funds should be part of the CVM's agenda for 2024.

The entry into force of the new regulatory framework for investment funds is scheduled for October 2, 2023. The adaptation of the entire investment fund industry in operation must take place by December 31, 2024, except for FIDCs in operation, which need to adapt by April 1, 2024.

Find out more in our e-book on the topic:
The details of CVM's new regulations on Investment Funds

See other CVM guidelines on the subject in the articles:
Regulatory framework for investment funds: nnew guidelines from the CVM

Regulatory framework for funds: new guidelines from the CVM

Category: Banking, insurance and finance

The Central Bank of Brazil (Bacen) and the National Monetary Council (CMN) published on Tuesday, the 23rd, Joint Resolution 6/23, which provides for the sharing of data related to indications of fraud by financial institutions, payment institutions, and other institutions authorized by Bacen to operate among themselves.

The rule aims to reduce the asymmetry of information between these institutions by establishing a minimum list of data and information that must be shared by them in their internal procedures and controls for prevention of fraud.

Who is subject to the rule?

• Financial institutions, payment institutions, and other institutions authorized to operate by Bacen.
• Consortium administrators are expressly excluded from the scope of the resolution.
• Institutions subject to the rule will be able to participate in the sharing system both at the point of registration and at the point of access to the data and information registered.

What should be shared?

• Those who supposedly carried out or attempted to carry out the fraud, according to the available evidence, where applicable. This determination, in turn, should be based on procedures and criteria defined and documented by the institutions in a detailed manner and compatible with their risk profile, legislation, and regulations in force (including, at a minimum, verification with data contained in systems, registers, and other databases available for consultation).
• A description of the indications that fraud has occurred or has been attempted. 
• The institution responsible for recording data and information.
• Details of the recipient account and its holder in the event of transfer or payment of funds.

The record does not apply to confidential data and information, under the terms expressed in special legislation, related to evidence of commission of the crimes of laundering or concealment of assets, rights, and valuables and financing of terrorism.

Does the customer need to consent?

• Institutions should obtain from customers with whom they have a relationship prior and general consent to record their data and information, for the purpose of processing and sharing information on indications of fraud under the terms of the resolution.
• Consent may be included in the contract between the client and the institution, in a prominent clause, or obtained through another valid legal instrument. In both cases, the documentation must be made available to Bacen.
• The provisions of the resolution do not remove the duty of confidentiality, protection of personal data, and free competition to be observed by the institutions.

What will sharing look like?

• The regulation provides for the implementation and use of an electronic system that allows, at a minimum, registration of data and information on indications of occurrence or attempted fraud identified by the institutions, as well as alteration, deletion, and consultation
• Sharing must also comply with the principles listed in the standard, which include security and privacy, as well as full and non-discriminatory access by institutions to the system's functionalities.
• Joint Resolution 6/23 also establishes security, data protection, and interoperability requirements to be observed by the institutions. Among the requirements, it is worth highlighting the need to identify and segregate the data recorded by means of physical or logical controls, as well as to adopt a single and common communication standard that allows execution of the system's functionalities.
• Institutions should also adopt control mechanisms to ensure effective compliance with the resolution, including definition of processes, tests and audit trails, metrics and indicators, as well as identification and correction of any deficiencies.
• The institution may hire third parties to provide the data sharing service, remaining responsible for compliance with the resolution and for observing the applicable regulations (mainly Bacen Resolution 4,893/21, on the contracting of data processing and storage and cloud computing services).

Bacen's role

• Institutions should make documentation on the electronic system and compliance with the requirements applicable to its implementation - including security, data protection, and interoperability - available to Bacen.
• The data shared by the system and the documentation containing the criteria and procedures for identifying the possible perpetrator of the fraud attempt should be available for ten years.
• Data, records, and information on application of the system's control mechanisms should remain available for five years, from each application of the controls.
• Bacen may adopt the measures necessary for implementation of the resolution, such as establishing additional functionalities for the electronic system, observing the minimum content provided, and detailing the parameters on service level agreements in the execution of the functionalities.

Compliance with the provisions of Joint Resolution 6/23 does not exempt the institution from the responsibility to carry out procedures and controls for fraud prevention provided for in the regulations in force or to report information on fraud to the competent authorities, as provided for by law.

Category: Agribusiness

Brazilian agriculture is a global reference in productivity and contributes directly to the country's economic development. The sector was mainly responsible for the strong GDP growth in the first quarter of 2023, as released by the IBGE.

This scenario requires the State to establish measures to promote agribusiness through tax incentives, public policies, and facilitated financing structures, among other types of subsidies.

This is the case of ICMS Agreement 100/97, approved by the National Council for Finance Policy (Confaz). The agreement offers the following tax incentives for various agricultural inputs:

• exemption from ICMS due on internal operations, as provided for in its third section; and
• 60% reduction of the ICMS calculation basis due on interstate transactions, under the terms of the first section.

In order to enjoy the tax benefits mentioned, as provided for in subsection II of Section Five of ICMS Agreement 100/97, states may require taxpayers to comply with two requirements:

• a substantive one, expressed in the deduction of the amount corresponding to the ICMS exemption from the price of the goods; and
• one of an instrumental nature, materialized in a demonstration of the respective deduction in the tax invoice.

Regarding the instrumental requirement, the legislation of each state regulates the specific procedures for demonstration of the deduction in the tax invoice (such as indication in the "Additional Information" field of the amount exempted, etc.)

However, in recent years, state revenue services have assessed taxpayers on the grounds that there is no proof of passing on of the deduction in the price of the products, even in cases where the irregularity identified is related only to compliance with the instrumental requirement (i.e., demonstration of the deduction on the invoice).

A relevant question then arises as to how to prove that the tax benefit has been passed on in the chain. This is because both ICMS Agreement 100/97 and the state laws that absorbed it did not expressly establish a form or procedure for proving that there was an effective deduction of the ICMS exempted from the price of the goods sold.

In an objective reading of subsection II of section five of the agreement, it would be defensible to conclude that it would be sufficient to fulfill the instrumental duty of demonstrating the deduction on the invoice to prove the deduction of the ICMS exempted.

It should be noted, however, that it is not being stated that the only way to prove that the ICMS exempted was passed on to the purchaser would be through the instrumental duty to indicate the deduction on the invoice - not least because this obligation is not confused with the substantive duty of ICMS Agreement 100/97.

Even in cases where the instrumental duty of demonstrating the amount of the deduction on the tax invoice has been fulfilled, there is a new tendency for tax authorities to sometimes resort to other evidence to question the actual deduction of the exempted ICMS (regardless of compliance with the instrumental duty).

In these cases, in the tax authorities' view, there is a risk that the taxpayer had raised the original net price of the transaction to artificially deduct the exempted ICMS. The agency's claim is that the tax benefits of ICMS Agreement 100/97 were not been passed on, but rather internalized by the seller in its profit margin.

From an analysis of the precedents related to this topic, it appears that this scenario tends to occur in cases where the tax authorities identify different prices in domestic transactions (exempt from ICMS) and interstate transactions (subject to reduction in the calculation basis). Exempt sales would be more costly than those partially exempted by the reduction of the tax basis.

Given these indications, the tax authorities choose to assume - without any verification or even knowledge of the commercial and market variables of the transactions or even of the agricultural sector as a whole - that the taxpayer failed to comply with the substantive requirement of passing on the economic advantage of the ICMS tax benefit.

The tax authorities, therefore, reverse the burden of proof to require the taxpayer to demonstrate actual deduction of the amount corresponding to the tax exempted from the price of the goods, disregarding all other variables that influenced the pricing of the transactions compared (in particular, the existence of a potential stock exchange quotation - whose variation is inherent to the business).

This understanding could lead to new assessments related to the application of other tax incentives conditioned on demonstration of the transfer of the benefit in the chain - as an example, one could mention ICMS Agreement 87/02 as an example, which grants exemption from ICMS on transactions with drugs and medicines destined for bodies of the federal, state, and municipal direct public administration.

In our assessment, in respect of legality and tax typicality, the burden of proving non-existence of transfer of the ICMS deduction per ICMS Agreement 100/97 remains with the tax authorities, who intend to disregard that the taxpayer applied the tax benefit.

In the same sense, the scholarly writings of Professor Paulo de Barros Carvalho elucidates that "the law establishes the need for the administrative legal act to be duly substantiated, which means that the tax authorities have to offer conclusive proof that the event occurred in strict conformity with the generic provision for the normative scenario."^[1]

As a consequence, "[i]f the taxpayer contests the grounds of the tax assessment issued by the tax authorities, the burden of showing the unfoundedness of this objection returns, again, to the tax authority, which will have to prove the legal inadmissibility of the objection, causing the requirement to remain."^[2]

In concrete terms, we have identified a tendency for tax authorities to increase the evidentiary burden in tax assessments in such cases. It is required that the taxpayer be able to provide sufficient evidence to demonstrate not only the actual passing on of the tax deduction to purchasers, but also the rationality of the differences between the prices charged, in order to rule out a presumption of improper application of the ICMS benefit.

Therefore, in cases of allegation of non-compliance with actual transfer of the incentive in the chain, through reduction in the price of the goods, we recommend that taxpayers analyze their operations to be able to offer evidence and arguments that prove to the tax authorities the existence:

• of different prices for different operations (including justification); and
• of the transfer of the tax benefit to the respective purchaser of the products.

^[1] CARVALHO, Paulo de Barros. The theory of evidence in administrative tax proceedings and the use of presumptions. Instituto Brasileiro de Estudos Tributários [“Brazilian Institute of Tax Studies”]– IBET.

^[2] Ibid.

Category: Agribusiness

The National Bank for Economic and Social Development (BNDES) added rural credit (BNDES Rural Credit) to its financing options in 2020. BNDES Rural Credit is an unsubsidized financial product that uses BNDES funds to support agricultural activities - including fishing, aquaculture, forestry production, and agro-industrial activities. This support is provided through the granting of financing for both funding and investment, both for investment projects and for one-off acquisition of machinery and equipment.

Among the operations that can be financed through BNDES Rural Credit are the following:

• fixed and semi-fixed investment projects in goods and services directly related to agricultural activity;
• individual purchases of machinery and equipment for use in agricultural activities; and
• financing for the funding of agricultural and livestock activities.

In the last three years, BNDES Rural Credit has already approved the release of R$ 11.2 billion in credit, distributed in more than 25 thousand transactions. In total, 98% of these transactions are targeted at micro, small, and medium-sized enterprises, which represents 90% of the total funds to be invested.

BNDES Rural Credit can be requested by:

• individuals who are farmers and resident and domiciled in Brazil;
• legal entities that are farmers with headquarters and management in Brazil; and
• cooperatives of farmers, with headquarters and administration in Brazil. In this case, in order to apply, potential borrowers of BNDES Rural Credit must seek a financial institution accredited by BNDES (the financial agent), which will provide the necessary documentation, analyze the possibility of granting the financing, and negotiate the applicable guarantees.

More than 70 institutions can act as financial agents. These include public and private banks, regional development banks, cooperative banks and credit unions, as well as automakers' banks.

On April 17 of this year, BNDES and the Ministry of Agriculture and Livestock (MAPA) launched a fixed-rate rural financing line in dollars (BNDES Rural Credit in Dollars), to give Brazilian farmers a financing alternative linked to the US currency.

In a context of exchange rate volatility and economic uncertainties, BNDES Rural Credit in Dollars has emerged as a new financing option to mitigate the risks associated with exchange rate fluctuations. This line of financing offers farmers the opportunity to hedge against possible devaluations of the Brazilian Real, as their revenues are often tied to exports.

In all, the BNDES will offer R$2 billion for the acquisition of agricultural machinery and equipment, considering monetary correction linked to the exchange rate variation, plus an interest rate of 7.59% per year (fixed rate).

In addition to the new BNDES Rural Credit in Dollars line, whose remuneration is composed of the fixed rate, BNDES Rural Credit has three other possibilities of basic financial costs in the formation of the final rate for financing:

• the Selic rate;
• the BNDES long-term rate (TLP); or
• the BNDES fixed rate (TFB).

The total terms of BNDES Rural Credit in Dollars range from 25 to 120 months, with a grace period of up to 24 months. To obtain financing, the borrower must meet specific criteria, such as:

• have revenues in US dollars or pegged to the US currency, which should be ascertained by the financial agent;
• have the ability to pay;
• earmark the funds for rural activities; and
• comply with legal and regulatory requirements.

BNDES Rural Credit in Dollars provides farmers with greater financial predictability, allowing for long-term planning and strategic decision-making with more security. In addition, it contributes to attracting international investors interested in participating in the Brazilian agricultural market, stimulating the development of the sector.

It is essential, however, that potential borrowers of BNDES Rural Credit carefully assess, together with the financial agent, the risks involved in this type of financing, such as possible exchange rate variations and the need for protection against dollar fluctuations.

In summary, BNDES Rural Credit in Dollars should supplement BNDES Rural Credit and potentially increase the productivity of the Brazilian agricultural market by granting credit to farmers and farm cooperatives with revenues in dollars or pegged to the US currency. A financing option that will allow farmers and farm cooperatives to purchase essential equipment.