Publications

Category: Real estate

The 2nd Panel of the Superior Court of Justice (STJ) confirmed in the ruling of AREsp 1.760.009/SP, by unanimity of votes, that the event that generates the Real Estate Transfer Tax (ITBI) only occurs with the effective registration of the acquisitive title in the competent land registry, even in cases of transfer of real estate via spin-off of companies.

Since the publication of the decision on June 27, 2022, motions for clarification of judgment have been submitted by the requesting company, on which the Superior Court of Justice (STJ) has already decided – amending the previous judgment – expressing the way in which the claim for refund of undue payment should be executed. The municipality present in the passive pole of the action did not present resources.

In the case decided by the STJ, the company filed a claim for refund of undue payment against the municipality of São Manuel / SP, requiring the repayment of ITBI amounts paid improperly to another municipality, and it was not known this fact at the time of its payment.

The company claims that, as the collection of the ITBI occurred in advance to the registration of the corporate act of spin-off in the property’s title record, at the time of its payment the transmission of the property had not yet occurred and, consequently, the tax triggering event.

The effective registration of the acquisitive title was only verified after georeferencing the property, necessary for the registration of the referred title. The procedure concluded that the property was located in a different municipality than the one in favor of which the ITBI was paid.

The controversies about the timing of the ITBI tax triggering event are many, although the Brazilian Civil Code, in article 1.245, is clear in relation to the fact that the transfer of real estate property only occurs with the registration of the acquisitive title in the competent land registry, and not with the mere signing of the title.

It is the popular saying: "the one who does not register, is not the owner".

The Brazilian Federal Constitution of 1988 (CF/88), in article 156, item II, provides that the ITBI is a tax of municipal jurisdiction charged before the "inter-living transmission, in any capacity, of real estate property, by nature or physical accession, and of in rem rights, except as collateral, as well as the assignment of rights to its acquisition”.

A considerable part of the Brazilian notary offices and land registries, however, does not act in this way.

To prenote the title for registration in the land registry, that is, prior to the registration of the security itself, it is necessary to present the ITBI payment slips or the tax exemption document.

In the specific case of the transmission of real estate via spin-off of companies, for example, there are many municipalities that argue that the constitution of the company on the date of registration of its corporate act in the commercial registry, by itself, would represent the occurrence of the tax triggering event.

There are also municipal laws establishing that, in the case of the transfer of real estate via private instruments (as happens in the division of companies that do not depend on public deed), the ITBI must be collected before the signature of the private instrument or up to 30 days after its signature, which, in our view, contradicts the legal provision of the CF/88 and Brazilian Civil Code.

As stated on Article 110 of the National Tax Code, the tax law cannot change the definition of institutes and concepts of private law to define or limit tax powers. Therefore, if civil law determines that the transfer of real estate property only occurs with the effective registration of the purchase title in the land registry, the tax authorities cannot use another concept to demand payment of the ITBI.

The 2nd Panel of STJ, when evaluating the issue, understood that the event that generates the ITBI only occurs with the registration of the title in the land registry, effective moment of the transfer of the real right. In 2019, in a case analogous to the presently analyzed judgment, STJ had already decided in a similar manner:

FISCAL. INTERNAL APPEAL IN THE REMEDY OF SPECIAL APPEAL. ITBI. TRANSMISSION OF THE PROPERTY. TAX TRIGGERING EVENT. REGISTRATION OF THE LEGAL BUSINESS IN THE COMPETENT LAND REGISTRY. RECURSIABLE FEES PROVIDED FOR IN ART. 85, §11 OF THE FUX CODE. SPECIAL APPEAL BROUGHT UNDER THE CPC/1973. NOT APPLICABLE. INTERNAL APPEAL OF THE MUNICIPALITY OF PORTO ALEGRE/RS TO WHICH IS DENIED.

1. According to the jurisprudential guidance of this Superior Court, even in case of spin-off, the tax triggering event of ITBI is the registration in the competent land registry of the property, in accordance with civil law. Therefore, there is no way to consider as a fact that the date of the companies' constitution by the registration of corporate act in the Commercial Registry. Previous: AgRg in REsp. 798.794/SP, rel. min. FRANCISCO FALCÃO, DJ 6.3.2006; RMS 10.650/DF, rel. min. FRANCISCO PEÇANHA MARTINS, DJ 4.9.2000; AgRg on REsp. 982.625/RJ, rel. min. HUMBERTO MARTINS, DJe 16.6.2008. [...] (AgInt no AREsp 794.303/RS, reporting judge Minister Napoleon Nunes Maia Filho, First Panel, DJe of 13/6/2019.)

It can therefore be concluded that the transfer of real estate via the spin-off of an entrepreneurial company is in no way an exception to the rule. The incidence of ITBI derives only from the effective transfer of ownership or other in rem right over the property (which is not the case of the mere signature or registration of corporate acts in the competent commercial registry, for example).

We perceive as correct the understanding of STJ that the generating fact of ITBI is the moment of registration of the title, regardless of the nature of the purchase title, whether public deed of sale and purchase or corporate act. You don't have to make any kind of differentiation. This ensures the legal certainty of real estate transactions.

In cases where the collection of ITBI is due to corporate transactions, therefore, the only date to be considered for the occurrence of the event that generates the ITBI should be the registration of the corporate act in the transferred property’s title record, and not the date of signature of the corporate instrument or its registration in the commercial registry or civil registration of legal entities.

Taxpayers, however, need to be aware of the specificities of applicable municipal legislation and local internal affairs regulations. It is quite common that the practice of municipal financial departments and land registries is not in accordance with the position stated by STJ and it is necessary to file preventive lawsuits, to be able to proceed with the registration of the title without having to pay the ITBI in advance or not pay the tax plus fine and interest.

Those who have already paid the ITBI due to the mere registration in the commercial registry of the corporate act of spin-off, without the effective transmission of property or other in rem right on the property, can thus judicially postulate the refund of the undue payment.

Category: Real estate

The Supreme Federal Court (STF), through the Extraordinary Appeal with Aggravation (ARE) 1,294,969, discusses whether there is or not the incidence of the Real Estate Property Transfer Tax (ITBI) on the assignment of rights to purchase and sale real estate property and, if so, when should be collected . The return of the theme to debate shows that the understandings already consolidated at the Court have not yet been definitively pacified.

The discussion began in 2018, when, in view of the assignment of rights to promise to purchase and sale an autonomous unit, the City of São Paulo raised the need to collect the ITBI as a condition for the drafting of the Public Deed for the assignees of rights. The assignees filed a writ of mandamus, which was upheld based on the premise that "the mere assignment of rights, carried out by a deed of purchase and sale, without its necessary registration, does not constitute a generating fact of the ITBI".^[1]

The city appealed, but the first instance decision was upheld. An extraordinary appeal was then interposed, tried on 11 February 2021. In the trial, Minister Luiz Fux proposed the following thesis for the purposes of general repercussion: "The event that generates the Real Estate Property Transfer Tax (ITBI) only occurs with the effective transfer of real estate property, which occurs through registration."

At first, therefore, when judging the issue, the Supreme Court reaffirmed the understanding that the generating fact of the ITBI is the transfer of the real estate property, which is only effective with the registration of the title in the real estate registry office. The municipality of São Paulo, however, appealed again through a motion for clarification, claiming that the case refers to the assignment of rights related to the commitment to purchase and sale of the real estate property, while the pacified jurisprudence only refers to deals with the transmission of the real estate property.

The municipality relies on the argument that the assignment of rights in the acquisition of real estate property is a hypothesis of the incidence of the ITBI expressly provided for in Article 156, II, of the Federal Constitution, while the jurisprudence refers to the transmission of the property, and not to the rights related to it.

Indeed, the Constitution recommends that the assignment of rights related to the transmission of real estate property is configured as a fact that generates ITBI. The municipality, therefore, argues that the registration of the title is irrelevant to the incidence of the tax on the rights of the acquisition of real estate property.

The reporting minister Luiz Fux voted to reject the motion, clarifying that the Supreme Court, in a previous decision, analyzed the legal controversy raised by the application of the dominant jurisprudence in such Court. According to the minister, the event that generates the ITBI "is only perfected with the effective transfer of the real estate property, which occurs through registration before the real estate registry office". Three other ministers followed the vote of the reporting minister.

Minister Dias Toffoli, however, pointed out that, in fact, the mentioned precedents, which consolidated the dominant jurisprudence in the Court, are related to inter-living transfer of real estate property or real estate property rights, while the case under discussion refers only to the assignment of rights related to the commitment to purchase and sell the real estate property.

The Minister also noted that the Federal Constitution provides, in item II of Article 156, the collection of ITBI in the assignment of rights related to the transfer of real estate property. He argued, thus, that the fixed thesis does not cover the hypothesis discussed in the present case.

Six other ministers followed the vote of Minister Dias Toffoli, and the Supreme Court, by a majority, accepted the motion for clarification to recognize the existence of constitutional matter and, therefore, its general repercussion, without, however, reaffirm jurisprudence.

Currently the Extraordinary Appeal with Aggravation (ARE) 1,294,969 is pending of judgment on its merits with the reporting minister André Mendonça .

Although so far the decisions on the ITBI were related to the matter if the incidence of the tax should occur only at the registration of the title, it is verified that the Supreme Court is positioning to rediscuss the theme and judge it definitively.

In this way, there are chances that new understandings on the subject shall be consolidated in the courts and that, consequently, there are relevant financial impacts on real estate transactions, even if they only referred to the transmission of rights, and not property.

^[1] J.J. J.J. 13th Court of Public Finance. Civil warrant - Extinction of the tax credit, Autos 1008285-73.2018.8.26.0053. Trial date: July 27, 2019. Release date: July 31, 2019.

Category: Environmental

Published on January 1, 2023, Decree 11,373/23 amended Decree 6,514/08, which regulates the procedure for environmental administrative violations and sanctions at the federal level.

In its 14 years of validity, Decree 6,514/08 was subject to repeated changes, the most recent – until now – made by Decree 11,080/22, which entered into force last May . Many of the alterations introduced in 2022 have now been amended or repealed by Decree 11,373/23.

Among the main changes brought  by the new decree is the exclusion of the conciliation hearing as a stage of the administrative process resulting from the issuance of infringement notices relating to environmental administrative violations.

Decree 6,514/08, in the form amended by Decree 11,080/22, established that the defendant, before presenting his defense and if he had not expressed his disinterest in conciliation, would participate in a conciliation hearing, to be informed of possible solutions aimed at ending the proceedings. Said solutions are:

• discount for payment of the fine;
• installment plan for payment of the fine; and
• conversion of fines into environmental quality preservation, improvement, and recovery services.

The conciliation hearing also resulted in the interruption of the deadline for submission of defense by the defendant . With the end of the conciliation hearing stage, there is no longer interruption of said deadline, which was maintained in 20 days.

With new wording given by Decree 11,373/23, the possible legal solutions to end environmental administrative proceedings are available regardless of holding a conciliation hearing.

The defendant may require the conversion of the fine into services of preservation, improvement and recovery of the quality of the environment, until the presentation of his closing statements.

The conversion can lead to the application of discounts to the total amount of the fine, depending on the time of the request for conversion and whether the accused entrepreneur is considered to be responsible for the execution of the project to be financed by the conversion of the fine.

In cases where the entrepreneur is responsible for carrying out the project – called direct conversion – the discount on the amount of the fine will be 40%, if the request for conversion is made until the filing of administrative defense by the defendant, and 35% for requests made until the submission of the closing statements.

In indirect conversion, when the entrepreneur adheres to a project previously selected by the entity who issued the fine, the discount will be 60%, if the request for conversion is made until the filing of administrative defense, and 50%, if made until the submission of the closing statements.

Also, in regards to the amount gathered through fine payments, changes were made to the portion that will be allocated to the National Fund for the Environment (Fundo Nacional do Meio Ambiente or FNMA).

Decree 11,373/23 now establishes that50% of the amount gathered by environmental administrative fines is to be reverted to the FNMA. In previous wording, given by Decree 11,080/22, only 20% was destined to the FNMA.

This particular point relates to another decree published on the same date: Decree 11,372/23, which regulates  Federal Law 7,799/89 – which established the FNMA.

In addition to the procedural changes, we see that Decree 11,373/23 and Decree 11,372/23 seek to revitalize the FNMA.

Based on these procedural changes, it is worth monitoring the procedures resulting from environmental administrative infractions, to evaluate the impacts of  Decree 11,373/23, especially regarding the time elapsed for ending discussions in the administrative sphere.

Category: Labor and employment

After the extension of the deadline for launching labor lawsuits events on eSocial, a new consolidated version of the eSocial Guidance Manual was made available on January 24, with new changes.

This latest version extends to April 1 the initial milestone of the information to be transmitted.

Therefore, for the purpose of posting information regarding labor proceedings, only decisions or agreements that have become final or concluded from April 1st should be considered.

For events S-2500 and S-2501, the new wording of the manual included the possibility of anticipating the sending of information for compliance with obligations arising from a court decision.

This forecast includes cases in which the employer will have to comply with court decisions in a period lower than that normally stipulated for the insertion of information in eSocial.

eSocial also provided a guidance note indicating all changes made to the manual.

Further changes may still be made by eSocial and will be duly informed.

With the latest changes, the deadlines become:

• Date of entry of labor proceedings events: April 1, 2023
• Initial milestone of the information to be transmitted: April 1, 2023
• First deadline for transmission of events: May 15, 2023

Category: Tax

The trilogy on the main topics analyzed in each of the three panels of the Superior Chamber of Tax Appeals (CSRF) of the Administrative Board of Tax Appeals (Carf) in 2022, we analyze in this article the cases decided by the 3rd Panel of the CSRF and the prospects for this year.

A topic of great repercussion analyzed in 2022 was the discussion regarding the inclusion of bonuses and discounts in the calculation basis of the PIS and Cofins. The result was favorable to the taxpayer, with the application of article 19-E of Law 10,522/02 (Appellate Decisions 9303-013.339 and 9303-013.338).

The 3rd Panel of the CSRF prevailed in the understanding that discounts and bonuses do not have the nature of revenue. Both were found to be elements included in the acquisition cost and, therefore, should not be included in the calculation basis of the aforementioned contributions.

Considering that one of the board members representing the taxpayers had voted unfavorably to them, the vote of the then chairman of Carf, Carlos Henrique de Oliveira, in favor of the taxpayers was decisive for the tied vote, a result that gave victory to the taxpayers.

Another case that gained prominence involves the crediting of PIS and Cofins on the freight of finished products between establishments of the same company, for which the case law was unstable.

The cases heard in August and September of 2022 represented an important turning point in the case law of the panel. The result was favorable to the taxpayer, by majority vote, which made it possible to take credits on this expense (Appellate Decisions 9303-013.339, 9303-013.338, and 9303-013.299).

Still with regard to PIS and Cofins credits, the board recognized, by application of article 19-E of Law 10,522/02, the possibility of crediting costs and expenses arising from the resale of fuels, products taxed under the single-phase arrangement (Decision 9303-012.861).

This judgment, however, predates^[1] the precedent set by the 1st Section of the Superior Court of Appeals (STJ), which, in an appeal to resolve a repetitive issue (REsp 1.894.741/RS - Repetitive Topic 1093), held that PIS and Cofins credits cannot be created on the purchase cost components of goods subject to single-phase taxation.

Regarding the discussion involving suspension of the IPI on sales of raw materials, intermediate products, and packaging materials destined for establishments engaged in manufacturing the products specified in article 29 of Law 10,637/02, for the first time, the taxpayer obtained a favorable decision from the board, with recognition of a suspension for establishments equated to industrial establishments, by application of article 19-E of Law 10,522 (Appellate Decision 9303-012.818).

Regarding the concept of billing for financial institutions, the panel maintained its understanding and considered the billing of these institutions to correspond to the total gross revenue earned, including financial revenue, since they would be the main revenue of the banking activity and, therefore, should be included in the billing of banks - the calculation basis of PIS and Cofins (Appellate Decisions 9303-013.369 and 9303-013.370).

The panel also analyzed the possibility of applying an isolated fine of 50% for non-collection of IRPJ and CSLL advances cumulated with an ex-officio fine of 75%.^[2]

Although the 1st Panel of the CSRF has original jurisdiction over this matter, it has also been decided by the 3rd Panel of the CSRF, due to the extension of jurisdiction resulting from Carf Administrative Rule 15.081/20 and Carf Ordinance 12.202/21. The board ruled against the taxpayer and, by majority vote, decided finding for the possibility of maintaining the concomitant collection of penalties for taxable events occurring after 2007 (Appellate Decision 9303-012.015).

Outlook for 2023

Perhaps the biggest challenge taxpayers will face this year is the return of the casting vote in the event of a tie in the Carf's judgments. This new legal provision was established with the promulgation of Executive Order 1.160/23 and the consequent revocation of article 19-E of Law 10,522/02, according to which the judgment should be resolved in favor of the taxpayer in the event of a tie vote.

The new Executive Order 1.160/23 may reverse the results of the judgment of several issues that have been resolved in favor of the taxpayer in administrative litigation.

Specifically in relation to the 3rd Panel of the CSRF, a major change in the official composition of the panel is expected in 2023, since the terms of office of the four members representing taxpayers end in June, with no possibility of reappointment. This circumstance will lead to the appointment of new board members in a proportion that has not occurred since Operation Zelotes in 2016.

Still in relation to the 3rd Panel of the CSRF, responsible for judging issues related to PIS and Cofins, a point that deserves attention is the publication, in December of 2022, of RFB Normative Instruction 2121/22, which consolidates rules on the calculation, collection, inspection, payment, and administration of contributions. The new standard replaces RFB Normative Instruction 1.911/19 and brings in relevant innovations especially on the use of credits, which should have repercussions on the judgments of the panel.

The retrospective of the main cases decided by the Carf's Superior Chamber in 2022 shows that the body has been playing a central role in the formation of theories and case law on tax matters, whether because of the quality and depth of the discussions, the complexity and specificity of the cases, or the amounts involved.

Changes in the case law of some topics are expected for 2023, especially with the return of the casting vote. Attention should be redoubled for those theories that have been decided in favor of the taxpayer based on article 19-E of Law 10,522.

In any case, we hope that the body maintains the quality standard of judgments observed in recent years, so that the institution is strengthened and continues to act as the main mechanism for reviewing administrative acts, with the ultimate goal of reducing judicial disputes.

^[1] The Carf judgment took place in the February 16, 2022 session and the appellate decision was published on April 25, 2022. The STJ's repetitive appeal was heard on April 27, 2022, and the appellate decision was published on May 5, 2022.

^[2] See an article published on Machado Meyer's Legal Intelligence webpage on the subject.

Category: Litigation

The Digital Markets Act (DMA) is the European Union's (EU) new law whose initial purpose is to make the digital marketplace fairer and more competitive. The rule came into effect on November 1, 2022, but the regulation will go through an implementation phase and the law will only be applied in fact from May 2, 2023.

In addition to the DMA, the Digital Services Act (DSA) and the Data Governance Act (DGA) are other pieces of legislation that will soon be put in place and, with the DMA, are part of an ambitious European Union strategy to make the current decade the "Digital Decade". To make this happen, the European Commission has proposed some targets for the digital transformation of Europe by 2030.

In order to achieve the proposed goal, the DMA seeks to limit the power of gatekeepers, companies that provide essential platform services such as online intermediation, search engines, social networking, video sharing, interpersonal communications, operating systems, cloud computing, and advertising.

The regulation establishes some criteria to identify a gatekeeper:

• have a strong and active economic position in at least three EU countries;
• operate an essential platform service that serves as a gateway for professional users to reach end users; and
• have a solid market position.

According to the British research institute Center for Economic Policy Research(CEPR), these criteria will not only reach the core businesses of the biggest players such as Google, Amazon, Facebook/Meta, Apple, and Microsoft (Gafam), but also platforms such as Oracle and SAP, which may end up being included in this list.

The list of duties of a gatekeeper covers situations related to conflicts of interest that arise in the relationship between it and its business users. It also deals with preserving the right to challenge in the relevant markets, with encouraging multi-homing, switching, lowering barriers to entry, and increasing transparency.

The prohibition for the gatekeeper to combine personal data, unless a specific choice has been presented to the end user and he has given his consent, is one of the obligations under the regulation, for example.

In this respect, the regulation went in the same direction as the German precedent. In 2019, the German Competition Authority (Bundeskartellamt) banned Facebook from combining user data. At the time, the platform's terms and conditions provided that users could only use the social network under the precondition that Facebook could collect user data off the website, or in smartphone apps, and assign that data to the user's Facebook account.

Another important self-executing obligation is the permission for business users to promote offers and enter into contracts with end users purchased on the platform through off-platform channels.

In this regard, the European Commission announced in 2020 the opening of antitrust investigations aimed at evaluating the rules set by Apple for app developers. The investigation dealt with the mandatory use of the in-app purchase system and the restrictions on iPhone and iPad developers' ability on alternative payment possibilities. In addition to limiting the payment method, Apple was charging a commission fee on transactions.

As for the right to contest, the DMA provides that the gatekeeper must provide advertisers and publishers with information about the price paid by the advertiser and the remuneration paid to the publisher for advertising services. This is to prevent competitors and advertisers from taking advantage and to make the process more transparent.

The regulation also brought in other changes that have been the subject of discussion. The first is the possibility for users to install apps from other distribution stores. With this, Apple users could install apps from Google Play or from websites.

The second is the interoperability of instant messaging programs. This would force, for example, WhatsApp (from Facebook/Meta) to receive messages from competing apps like Signal or Telegram.

In the event of non-compliance with some of the obligations set out in the regulation, the commission may fine the gatekeepers up to 10% of their total turnover in the previous year, and impose daily fines of up to 5% of average daily turnover.

And in Brazil?

The General Superintendence of the Administrative Council for Economic Defense (SG/CADE) recently opened an administrative investigation against Google for practices in the Android operating system. In the document opening the investigation, the SG relies on Google's conviction in the European Commission, which found exclusivity agreements between Google, cell phone manufacturers, and mobile network operators to be unlawful.

In the same competitive line, Mercado Livre reported, on December 5th of this year, the the opening of a case against Apple in CADE for anticompetitive practices. In a communiqué, Mercado Livre claimed that Apple imposes various restrictions on the distribution of digital goods and in-app purchases, including a ban on apps distributing third-party digital products and services, such as movies, music, video games, books, and written content.

Given this recent development and the importance of the DMA, not only for its impacts on large technology companies, but also for promoting a more competitive digital market, there is a high possibility that the Digital Markets Act will inspire similar legislation here in Brazil, much like how the General Data Protection Regulation (GDPR) had a strong influence on the creation of the General Data Protection Law (LGPD). There are even signs in this direction with Bill 2,768/22.

This bill, presented to the steering committee of the Brazilian House of Representatives on November 10, aims to change the Brazilian Civil Rights Framework for the Internet and the General Telecommunications Law, and would give Anatel the power to regulate and supervise digital platforms. The agency would be responsible for issuing rules on the operation of digital platforms that offer services to the Brazilian public, applying sanctions, deciding in the administrative sphere on the interpretation of the legislation applicable to digital platforms, and administratively settling situations related to conflicts of interest.

Although its creation was influenced by the DMA, Bill 2,768/22 presents some distinctions in its initial text.

An example of this is the creation of the Digital Platform Oversight Fund (article 15). To make it up, digital platforms that offer services to the Brazilian public would be required to pay an annual fee equivalent to 2% of their gross operating revenue.

The bill also classifies digital platforms as holders of the power to control essential access when they obtain annual operating revenue equal to or greater than R$70 million from offering services to the Brazilian public (article 9).

As for administrative penalties, the text provides for warnings, a fine of up to 2% of the economic group's revenues in Brazil in its last year of operation, mandatory and prohibitory obligations, temporary suspension of activities, and a ban on conducting activities (article 16).

The trend, therefore, is that although large technology companies have established themselves in a less regulated environment, they will need to adapt to an increasingly regulated environment. Everything indicates that the GDPR is just the tip of the iceberg. Both the DMA and the DSA are coming to sanctify this new reality that, it seems, will not be limited only to European territory.

When it comes to new regulations regarding the digital environment, there are numerous discussions. After all, everyone wants to get the most out of technology and innovation, and regulations somewhat slow down this process. However, establishing measures to combat anti-competitive practices in the digital environment potentially creates a fairer environment, conducive to economic development and beneficial to users.