Publications

Category: Tax

What is the time of taxation, for the purposes of Corporate Income Tax (IRPJ) and the Social Contribution on Net Income (CSLL), of the tax credit recognized in court and subject to compensation? Answer to Advance Ruling Request183/21, published at the end of last year, was a late response to this recurring question from taxpayers, but did not completely address the divergence.

The previous understanding of the Federal Revenue Service of Brazil (RFB), expressed through the Interpretative Declaratory Act SRF 25/03, was that, when the court decision already defines the amount to be paid, it is enough to make the final judgment that recognizes the amount to be refunded to attract the incidence of IRPJ and CSLL. The premise is that, in such situations, already from the final transit, the taxpayer acquires legal availability on the amounts with the configuration of an increase in assets, a fact that generates irpj and CSLL, as provided for in article 43 of the National Tax Code (CTN). But in cases where decisions only recognize a right to repayment claim there was no clear manifestation of the IRS.

This was precisely the situation dealt with in Answer to Advance Ruling Request183/21. The Irs has defined that the date of submission of the first statement of compensation (mother statement) will be the time frame to attract the incidence of IRPJ and CSLL of the recognized credits. As shown in SC 183/21, it is at this time that one has a "right right, which arises from the final judgment of the decision – and quantifiable, by reason of the identification of the full amount to which it is entitled".

The answer already represents a small advance, because the Irs expressly ruled out the possibility of incidence of IRPJ and CSLL when:

• of the final judgment of an inliquid decision, which declared only the right of claim liable to compensation;
• accounting recognition of credits; and
• application for the qualification of the claim in the administrative context (formality necessary for the purposes of credit compensation arising from legal proceedings).

In this respect, the response of the Irs was late, but welcome, since these three moments, in fact, do not matter in the acquisition of legal availability and, therefore, do not justify the incidence of IRPJ and CSLL.

However, the fact that the Irs defines as a time frame the date of sending the first statement of compensation for the taxation of all credit arising from the lawsuit, regardless of the actual use, is questionable.

If the understanding of the Answer to Advance Ruling Requestprevails – and is effectively practiced – the financial impact on taxpayers' cash will be drastic and contemporary to the delivery of the first DCOMP, since the incidence of IRPJ and CSLL will fall on the total value of the credit arising from the final lawsuit, regardless of confirmation of the amounts by the Internal Revenue Service (approval of the declaration) or even the use of the other portions of the credit,  transmission of the other compensations.

In our view, the position of the Internal Revenue Service in relation to taxation at the time of the first statement of compensation, in which the full amount to be compensated is declared, does not represent the actual moment of the equity increase and economic and legal availability. There is no sign of wealth or contributory capacity, and an attempt by the Tax Authorities to tax the values at this time should be rejected by the judiciary.

Far from being a purely theoretical situation, this positioning of the Irs represents a potential risk for several taxpayers who, after long years of battle with the Tax Office, finally obtained in court the recognition of a higher amount collected, and that could be compensated. In this group, there are taxpayers who guaranteed their right to recover the value of ICMS unduly included in the calculation base of PIS and Cofins and those who had the recognition of non-taxation by IRPJ and CSLL of selic values on undue payment. These discussions moved great values and, with this understanding exposed in the Consultation Solution, the Irs seems to intend to mitigate its defeat, reaching precisely part of the undue payment recognized by the Judiciary.

In the same Consultation Solution, the Irs provides that the interest on late payment due on the tax undue payment must comprise the calculation bases of IRPJ, CSLL, Cofins and PIS/Pasep in the period in which the main debt is recognized.

This position of the Internal Revenue Service is in direct confrontation with the recent position of the Supreme Federal Court (STF) in Extraordinary Appeal 1.063.187, submitted to the regime of general repercussion, in which was fixed the thesis that "it is unconstitutional the incidence of IRPJ and CSLL on the amounts related to the Selic rate received due to the repetition of tax undue payment".

The Supreme Court thus expressed itself, recognizing the legal nature of interest on late payment, which aim to remake effective losses, decreases, not characterizing the increase in equity. Consequently, they are outside the field of incidence of IR and CSLL. The trial is not closed. The analysis of the opposing declaration embargoes by the Union in Extraordinary Appeal 1,063,187 requiring the modulation of the effects of the judgment remain pending, leaving the issue partially open.

Anyway, all this movement of the IRS seems to want to demonstrate an absolute irresignation with the limits of the legal relationship in the way it was delimited by the judiciary and an attempt, hopefully frustrated, to decrease the taxpayer's earnings.

It is important to follow the consequences of ongoing lawsuits that discuss the issue and anticipate any restrictive measure imposed by the Internal Revenue Service, seeking, for this, the protection of the Judiciary.

Category: Environmental

Federal Law 14,285, published on December 30, 2021, promoted changes in the Forest Code (Federal Law 12,651/12), the Land Use and Parcelling Act (Federal Law 6,766/79) and the law dealing with land regularization of occupations on Federal land in the Legal Amazon (Federal Law 11,952/09). The changes specifically affect the Permanent Preservation Areas (APPs) located around watercourses in consolidated urban areas. Among the main changes, municipalities are now entitled to enact local laws to establish extensions of marginal bands of APP differently from those provided for in the Forest Code, taking into account local characteristics.

The newly sanctioned federal standard modified Article 3, item XXVI, of the Forest Code and defines a new concept for consolidated urban area.^[1] In addition to being included in the area or in the urban perimeter of the municipality (defined in the master plan or in specific municipal law), the area must meet the following criteria:

• have a road system in place;
• be organized in predominantly built blocks and lots; and
• have predominantly urban use, characterized by the existence of residential, commercial, industrial, institutional, mixed or directed buildings to the provision of services.

In addition to meeting these requirements, consolidated urban areas will be defined by the existence of at least two of the following urban infrastructure equipment/systems deployed: rainwater drainage; sanitary sewage; drinking water supply; electricity distribution and street lighting; and urban cleaning, collection and management of solid waste.

An even more significant modification was made in Article 4 of the Forest Code, with the inclusion of § 10:

"§ 10. In consolidated urban areas, after hearing the state, municipal or district environmental councils, municipal or district law may define marginal bands distinct from those established in item I of the caput of this article, with rules that establish:

I – the non-occupation of disaster-risk areas;

II – compliance with the guidelines of the water resources plan, the basin plan, the drainage plan or the basic sanitation plan, if any; and

III – the provision that the activities or enterprises to be installed in the areas of permanent urban preservation should observe the cases of public utility, social interest or low environmental impact set out in this Law."

Law 14.285/21 included § 5 in article 22 of Law 11.952/09, to establish that the master plans and municipal laws of land use and parceling must determine the limits of the riparian APPs of natural watercourses located in urban areas, with the condition that the state and municipal environmental councils be heard.

Art. 4 of Law 6,766/79 was also amended. With the new wording, the extension of non-buildable areas resulting from natural water bodies in consolidated urban areas (considering the new definition set in the XXVI section of Article 3 of the Forest Code, highlighted above) will be established from its own environmental diagnostic studies, prepared by the municipality, and should also keep in line with the municipal or district laws responsible for the territorial planning of the municipality.

Before Law 14.285/21, there was a controversy involving the treatment of urban APPs. The question is whether it would be appropriate to apply to these cases the Forest Code, with minimum distance fixation ranging from 30 to 500 meters from the edge of the gutter of the regular bed of the water bodies – according to the width of the body of water – or the Land Parceling Law, which seals buildings at distances of less than 15 meters from each of the banks of the watercourse. The controversy was pacified by the thesis signed by the Superior Court of Justice (STJ) in Repetitive Theme 1.010, in which the understanding of the prevalence of the Forest Code was established to set the non-building extension in the APPs of any perennial or intermittent watercourse, in stretches characterized as a consolidated urban area.

From now on, with the edition of Law 14.285/21, each municipality must elaborate a socio-environmental diagnosis, with defined technical criteria, to determine which land extension from the banks of the watercourses in the urban perimeter must be considered app range.

It is worth following the discussions and developments of the theme in the higher courts, even to verify if there will be questions about the constitutionality of Law 14.285/21.

^[1] Before the issue of Federal Law 14.285/21, the Forest Code used the definition of consolidated urban area established in Federal Law 11.977/09, which deals with the My House, My Life Program (PMCMV) and land regularization of settlements located in urban areas, among other measures.

Category: Tax

The 1st Section of the Superior Court of Justice (STJ) recently ended a debate that had lasted for more than 20 years in the courts. In judging the embargoes of divergence in the Special Appeal (EREsp) 1.213.143/RS, the 1st Section recognized the right of the taxpayer to keep the IPI credit, even in the face of outflows of products not subject to the tax.

The IPI is a tax subject to the non-cumulative regime and, pursuant to Article 153 of the Federal Constitution, "will be non-cumulative, offsetting what is due in each transaction with the amount charged in the previous ones".

In the case of IPI, the non-cumulative is unrestricted, unlike that established for the ICMS, in which there is a need to reverse the credit in non-taxed outflows.

Also, Article 150, paragraph 6, of the CF/88 allows that a specific law grants  the right of credit in other hypotheses.^[1]

Non-cumulative as a technique includes distinct systematics. This, moreover, is the reason for different constitutional treatments to deal with the non-cumulative of IPI and  ICMS.

In this context, and based on the prerogative set out in Article 150, paragraph 6, of the CF/88, the National Congress issued Law 9.779/99 to make explicit the right of taxpayers to maintain the IPI credit, including in case of outflows of final products not subject to the tax:

"Art. 11. The creditor balance of the Tax on Industrialized Products – IPI, accumulated in each calendar quarter, resulting from the acquisition of raw material, intermediate product and packaging material, applied in industrialization, including a product exempt ed or taxed at the zero rate, which the taxpayer cannot compensate with the IPI due on the outflow of other products, may be used in accordance with the provisions of the arts. 73 and 74 of Law No. 9,430 of December 27, 1996, observed standards issued by the Federal Revenue Office of the Ministry of Finance."

With the publication of Law 9.779/99, the Federal Revenue of the 7th Region came to recognize the possibility of the taxpayer maintaining the IPI credit from the acquisition of ipi-taxed goods applied to the final product not subject to the tax:

"IMMUNE END PRODUCT. CREDITING. POSSIBILITY.

According to the dominant administrative view, the provisions of Article 11 of Law 9.779/99 generally defers to the industrial of immune products the right of credit to the products and their use to, successively, compensate with IPI perhaps due, compensate with another tax or obtain reimbursement in kind, obeying the relevant formalities. Legal Provisions: CF, art. 150, VI, "d", art. 153, §3, II and III, art. 155, §3; Law 9.779/99, art. 11; IN 33/99, AND COSIT 00/17."^[2]

However, further, the IRS revised its position by the edition of the Interpretative Declaratory Act (ADI) 05/06 and began to apply it. As provided in this ADI, it would not be allowed to maintain the IPI credit when the materials were applied in a final product with NT rating (not taxed).

Under the framework of Brazilian Taxpayers Council (Carf), on some occasions it was recognized the right to maintain the IPI credit, including in case of outflows not subject to the tax:

"IPI. COMPENSATION BAD CREDIT, INTERMEDIATE PRODUCT AND PACKAGING MATERIAL. IMMUNE PRODUCT. The products listed in TIPI as non-taxable under constitutional immunity and which are not excluded from the concept of industrialization of Art. 3 of the RIPI/98 shall enjoy the right to reimbursement of claims related to the materials used in the production process, as available in Article 11 of Law No. 9,779/99. Appeal provided in part."^[3]

But after the fixing of the theme in Stare decisis  Carf 20, the right to maintain IPI credit on outflows not subject to the tax had been recognized only in case of exportation:

"There is no right to IPI credits acquisitions of insums applied in the manufacture of products classified in TIPI as NT."^[4]

As the Supreme Court (STF) ruled that the discussion on the possibility of maintaining the IPI credit provided for in Law 9.779/99 would be of an infraconstitutional order,^[5] the Superior Court of Justice had the final word on the subject.

The leading case was the EREsp 1.213.143/RS, reported by Justice Assusete Magalhães, who voted not to recognize the right to maintain the IPI credit in outflows not subject to the tax. Justice Regina Helena Costa asked for a view and voted to recognize the right to maintain the IPI credit, including in the outflows not subject to the tax.

After the debate on the subject between the Justice of the 1st Section, it was established the understanding that it is legitimate to maintain the IPI credit, including in outflows of final product not subject to the tax:

"CIVIL AND TAX PROCEDURE. DIVERGENCE EMBARGOES ON SPECIAL APPEAL. 2015 CIVIL PROCEDURE CODE. APPLICABILITY. TAX ON INDUSTRIALIZED PRODUCTS - IPI. GRANTING CREDIT THROUGH ART. 11 OF LAW No. 9,779/1999. AUTONOMOUS CREDITING. UNTYING OF THE NON-CUMULATION RULE - DISTINGUISHING. USE OF THE IPI CREDITOR BALANCE IN THE UNFEASIBILITY OF COMPENSATION WITH THE MENTIONED TAX INCIDENT ON EXIT. HYPOTHESIS OF UNTAXED PRODUCT. POSSIBILITY.

(...)

III – Law No. 9,779/1999 established the use of IPI credits as an autonomous tax benefit, since it does not translate merely the explicitness of the rule of non-cumulation.

IV – Because it is the use of IPI credits as an autonomous benefit, directly granted by law for the dishonored exit, the discussion returned by the Embargoes of Divergence distances itself from the core of the controversy involving the non-cumulation of this tax - need for distinguishing -, even taking care of eminently infraconstitutional matters.

V – Art. 11 of Law No. 9,779/1999 confers ipi credit when it is impossible for the taxpayer to compensate for this amount with the aforementioned tax levied on the outflow of other products. In the impossibility of using the sum resulting from the onerated entry, the pointed article opportunistizes the consolidated way of the arts. 73 and 74 of Law No. 9,430/1996. Authorized, therefore, the use of the value released in the tax writing, precisely with the output "of other products". It should be reiterated that other products in this context may be exempted, subject to the zero or untaxed rate.

VI – Unacceptable to restrict, by an infralegal act, the tax benefit granted to the productive sector, especially when the three situations – exempt, subject to the zero rate and not taxed – are equivalent as to the practical result outlined by the Benefit Law.

VII – Therefore, it finds legal shelter to take advantage of the ipi balance arising from purchases of raw materials, intermediate products and taxed packaging materials, in the outflows of products not taxed in the period after the validity of Art. 11 of Law No. 9,779/1999.

(...)

IX - Embargoes of Divergence improvised."^[6]

In order to standardize the jurisprudence on the right to maintain IPI credit, including outflows not subject to the tax, Stare decisis Carf 20 became obsolete. For this reason, and as stated in Article 19 of Law 10,522/02,^[7] Carf's judges should realign their jurisprudence on the subject and proceed to follow the understanding signed by the Superior Court of Justice.

^[1]"Art. 150. Without prejudice to other guarantees guaranteed to the taxpayer, the Union, the States, the Federal District and the Municipalities are delimited:

(...)

• 6 - Any subsidy or exemption, reduction of calculation basis, granting of presumed credit, amnesty or remission, relating to taxes, fees or contributions, may only be granted by specific law, federal, state or municipal, which regulates exclusively the matters listed above or the corresponding tax or contribution, without prejudice to the provisions of Article 155, § 2, XII, g."

^[2] SRRF/7ª RF/DISIT 248/2000 Consultation Solution

^[3] Judgment 202-16.984, rapporteur-designate: Maria Cristina Roza da Costa, DOU of 21/08/2007

^[4] Summation Carf 20. Binding, according to Ordinance MF 277, of 07/06/2018, DOU of 06/08/2018

^[5] "ACCORDING TO REGIMENTAL PERFORMANCE IN EXTRAORDINARY APPEAL. TAX LAW. TAX ON INDUSTRIALIZED PRODUCTS - IPI. PRINCIPLE OF NON-CUMULATION. PRODUCTS WITH UNTAXED OUTPUTS. RETRACTION JUDGMENT. 1. The legal regime of the IPI was completed with Art. 11 of Law 9.779/1999, so that the right to credit exempt, untaxed or subject to the zero rate is only possible with the advent of said legal law. Previous. 2. Although they have different legal natures, there is no differentiation in situations where products are subject to exempt, untaxed or reduced exits at zero rate, because the legal consequence is the same within the production chain, due to the tax exemption of the final product. (...) 4. The verification of the scope of the tax benefit established by Article 11 of Law 9.779/1999 is limited to the infraconstitutional scope. Previous. 5. Regimental grievance to which it is dismissed." (STF, 2nd Class, AgR in The AgR at RE 379.843, DJU of 27/03/2017)"

^[6] DJU of 01/02/2022

^[7] "Art. 19. The Attorney General's Office of the National Treasury is exempt from contesting, offering counter-reasons and appeals, and is authorized to give up appeals already brought, provided that there is no other relevant basis, in the event that the action or the judicial or administrative decision deals with:

(...)

VI – the meth decided by the Supreme Federal Court, in constitutional matters, or by the Superior Court of Justice, the Superior Labor Court, the Superior Electoral Court or the National Class of Standardization of Jurisprudence, within the scope of its powers, when:

(a) is defined as a general repercussion or repetitive resource; or

b) there is no feasibility of reversal of the thesis signed in a sense unfavorable to the National Treasury, according to criteria defined in the act of the Attorney General of the National Treasury;"

Category: Capital markets

The year 2022 has been a year of much news for Brazilian companies, and it should continue to be. We live in an environment of uncertainty in the market caused by the approaching presidential election and the unfolding of the conflict in Ukraine, associated with the downturn  of the covid-19 pandemic. In scenarios like this, the market becomes more selective for equity transactions, which should lead to a reduction in the number of IPO and follow-on transactions in 2022 compared to 2021.

On the other hand, companies still need resources to finance their investment and growth needs, just as investors need to allocate their resources in search of good returns for their portfolios. We can therefore expect an increase in borrowing activity via debt in the capital markets. In line with this trend is the measure recently announced by the federal government to exempt capital gains for foreigners who invest in debt securities of Brazilian companies (the date of publication of the measure is still awaited).

From the regulatory point of view, the year began with waiving the need for corporations to publish legal publications in the official gazettes. It now suffices to carry out abridged publications in a large circulation newspaper, with full disclosure in the digital environment. The measure, challenged in court by the Brazilian Association of Official Press (Abio) through a direct action of unconstitutionality in the Federal Supreme Court, came into force in January of this year and was even the subject of guidelines from the CVM in its annual guidance letter to public companies.

Furthermore, CVM Resolution 60, which consolidates the rules regarding securitization companies and the operations of issuing CRIs and CRAs, enters into force in May. Among the news already disclosed and not yet in effect, the one with the greatest impact, however, is CVM Resolution 59, which amends CVM Instruction 480. This resolution comes into effect in January of 2023 and will impose a profound reform in the content of the reference form, one of the main instruments of disclosure of companies to the market. The document will become more objective and up-to-date, including, as a new feature, a specific section on the issuer's ESG practices.

Also expected for 2022 are the new CVM rules that will consolidate the public offering framework in Brazil, the object of a public hearing that ended in July of 2021 (see notice), which will also mean an important change in the framework currently in force. New rules are also expected for Brazilian Depositary Receipts (BDRs), which have recently undergone specific regulatory reforms (see notice).

All this news points to the need for publicly traded companies to prepare for changes in the short-term horizon. To help them in this process, they can count on Machado Meyer's team of specialized professionals.

Category: Litigation

From the edition of the new Code of Civil Procedure (CPC) and especially by the positiveity of fundamental norms of the civil procedure, there is no room for the technique of defensive jurisprudence^[1] continue to be applied by the higher courts – especially the Superior Court of Justice (STJ) – as a way of inadmitting appeals, preventing a case from reaching the just and effective solution of the merits of the case.

Defensive jurisprudence is the practice adopted by the higher courts, in particular the Supreme Court, of not knowing resources by overvaluing the formal admissibility requirements.^[2] Often, this measure undermines the constitutional guarantee of access to justice, understood as the right to a just and effective solution to the merits of the case.

The new procedural system inaugurated by the CPC privileges, in its articles 4th and 6th, the principle of the primacy of judgment on merit, which reinforces the constitutional guarantee of access to justice.^[3]

Despite the effort and normative advance of the CPC, the technique of defensive jurisprudence persists in the day-to-day of the courts, with the application of sums of jurisprudence that impose misplaced decisions of inadmission of appeals.

Among these summations stands out the 182 of the Supreme Court, which recommends that "it is unfeasible the aggravation of Art. 545 of the CPC that ceases to specifically attack the grounds of the aggravated decision". Edited still under the old CPC, this summary continues to be applied by the STJ. In a trial of embargoes occurred in 2019, the 4th Tuma of the Supreme Court reaffirmed the "need for the party, in internal injury brought against the rapporteur's monocratic decision given in special appeal, imposes all the foundations of the aggravated decision".^[4]

According to Summary 182, the applicant has the procedural burden of challenging all the grounds of the aggravated decision, which does not entail any exception. Based on this understanding, the Special Court of the Supreme Court, in the judgment of EAREsp 746.775/PR, on 11/30/2018, decided that the special appeal injury must contest all the grounds of the decision of recursal default, even if the grounds are autonomous.

However, after this trial, there was no consensus among the ministers on what would be the fate of possible internal injury brought against the monocratic decision of inadmission given in the grievance on special appeal.

In view of this, two currents were formed: the first understood that the "party could, in the case of internal injury, fail to challenge an autonomous foundation of the aggravated decision, so that the matter would only be included by the preclusion";^[5] for the second current, the same orientation applied to the disease on a special appeal should be adopted in the internal injury.^[6]

On 10/20/2021, the Special Court of the Supreme Court again addressed the subject, in judging REsp 1.424.404/SP, and acknowledged that "the jurisprudence of this Court must prevail in the sense that the absence of challenge, in the internal grievance, of an autonomous chapter and/or independent of the rapporteur's monocratic decision — given when assessing special appeal or grievance on a special appeal — only entails the preclusion of the uncontested matter,  not attracting the incidence of Summary 182 of the STJ".^[7] Therefore, the understanding of the first current was adopted.

According to the Special Court of the Supreme Court, "the decision that does not admit the Special Appeal has as its exclusive scope the assessment of the assumptions of recursive admissibility. Your device is unique." ^[8] In other words, even if the statement of reasons make it possible to conclude that one or more causes prevent the judgment of the merits are not autonomous chapters, which is why it is necessary to challenge all its grounds.

On the other hand, it was concluded that , "when the rapporteur decides monocratically the Special Appeal or its Grievance, he does so by examining each plea in isolation, giving rise to autonomous chapters, which allows the party the freedom to define which grounds will be challenged, so that the omission entails only the preclusion of the matter, but does not prevent its knowledge by application of Summary No. 182/STJ".^[9]

The conclusion of the trial is a encouragement for those who advocate a lower formalism and expect, increasingly, decisions of the Supreme Court that corroborate the constitutional guarantee of access to justice.

^[1] BARBOSA MOREIRA, José Carlos. Illegitimate restrictions on knowledge of resources. In: BARBOSA MOREIRA, José Carlos. Procedural Law Issues. Ninth grade. São Paulo: Saraiva, 2007, p. 280-281. The renowned jurist also asserted that: "the travo of dissatisfaction left by decisions of not knowledge is inevitable; they resemble meals in which, after the appetizers and the hors d'oeuvre, if they said the guests without the announced main dish" (In BARBOSA MOREIRA, José Carlos. Illegitimate restrictions on knowledge of resources. Revista Forense, Rio de Janeiro, v. 386, year 102, 2006, p. 155).

According to the jurist, this is the technique of "overvaluing formal requirements to derail the assessment of recursal merit", which should not be tolerated from the new code of essentially instrumental character, modern and concerned with fending off excessive and uncommitting formalisms.

^[2] Part of the doctrine adopts a more severe position, such as José Rogério Cruz and Tucci, who points out: "It is true that certain obstacles to the admission of resources to the higher courts are the result of ingenious construction, which maintain some hermeneutic coherence with the procedural rules in force. However, there are, in significant numbers, other barriers that are most identified to 'Praetorian perversity', which have no plausible reason to subsist in the framework of a civilized legal system, committed to the effectiveness of judicial protection. (...) It should be emphasized that this orientation, as is the case in the general ity of the so-called defensive case-law, shows that the applicant's substandright does not have the slightest relevance to the court. I understand, with due respect, that such a position represents an inably undisputed denial of jurisdiction. Indeed, with regard to the Supreme Court – the self-styled 'Citizenship Court' – despite some flexibility observed in recent times, it continues to use questions and stratagems, in the effort of ruling out the judgment of the merits of the appeal, to the detriment of its constitutional mission in favor of the unity of the application of federal law" (CRUZ and TUCCI,  Jose Rogério. One suffices to perversity of defensive jurisprudence. São Paulo, 2014. Available in: www.conjur.com.br/2014-jun-24/basta-perversidade-jurisprudencia-defensiva. Accessed: 3/2/2022.

^[3] THEODORO JUNIOR, Humberto. Code of Civil Procedure Annotated, 22nd edition, Rio de Janeiro: Forense, 2019, p. 8).

^[4] See news published on the STJ website about the application of the summary, available at: https://www.stj.jus.br/sites/portalp/Paginas/Comunicacao/Noticias/Em-agravo-interno--parte-deve-impugnar-todos-os-fundamentos-da-decisao-agravada-.aspx. Accessed: 17/12/2021.

^[5] Crumbs, "Victory of the law and defeat of the defensive jurisprudence in the Supreme Court!". Available in: https://www.migalhas.com.br/depeso/353646/vitoria-da-advocacia-e-derrota-da-jurisprudencia-defensiva-no-stj

^[6] FELÍCIO, Gabriel Bartolomeu and ADAMEK, Daniela Pina von. Victory of the law and defeat of the defensive jurisprudence in the Supreme Court! Crumbs website. Available in: https://www.migalhas.com.br/depeso/353646/vitoria-da-advocacia-e-derrota-da-jurisprudencia-defensiva-no-stj

^[7] See decision in full content on the jusbrasil website. Available in: https://stj.jusbrasil.com.br/jurisprudencia/1317326990/embargos-de-divergencia-em-recurso-especial-eresp-1424404-sp-2013-0230570-3/inteiro-teor-1317327025

^[8] ditto

^[9] Ditto

Category: Digital Law

The National Data Protection Authority (ANPD) published on January 28 resolution CD/ANPD 02, which approved the regulation of application of the General Law on the Protection of Personal Data (LGPD or Federal Law 13.709/18), the text of which is immediately valid for organizations classified as small processing agents, which includes Startups.

Startup is a nascent business organization or in recent operation, whose performance is characterized by innovation applied to business models or to products or services offered. The company does not need to be in the technology segment to be considered startup, but innovation, inseparable from this type of business, is usually tied to digital technologies. Frequently the digital business of Startups around data, including personal data, which is why the intersection of the themes startup and data protection is so important. The ANPD Regulation, when conceptualizing startup in paragraph III of Article 2, recalls the framework of the Supplementary Law 182/21 itself (Legal Framework of Startups).

In Brazil, the LGPD provides for differentiated treatment for Startups data processing agents, which has been regulated by the ANPD not only to Startups, but also for innovation companies, small businesses and micro-enterprises. Submitted to public consultation on August 27, 2021, the regulation went through several stages until its final deliberation and unanimous approval by the Board of Directors on January 24 of this year.^[1]

The ANPD expressly acknowledged that reducing regulatory burden and stimulating innovation are key factors for the development of Startups and, consequently, for the growth of the country itself (Order 41/2021/SG/ANPD). In this regard, a study conducted by the Brazilian Association of Startups and Deloitte^[2] revealed that of the 2,486 Startups analyzed throughout the national territory, 83% have annual revenues of less than R$ 1 million, i.e., the majority did not reach a minimum level of maturation, much less the breakeven. This means that any reduction in compliance costs, including data processing obligations, will certainly contribute to fostering the Startups.

However, there are limits for such benefits, which exclude those who perform high-risk treatment for holders or those who received gross revenue spree sofa exceeding R$ 16 million in the previous calendar year – or a new amount of R$ 1,333,334, multiplied by the number of months of activity in the previous calendar year, when less than 12 months, regardless of the corporate form adopted.

The processing of high-risk personal data shall be deemed to meet, cumulatively, at least one general criterion and a specific criterion. The Regulation lists as general criteria:

• the processing of personal data on a large scale, i.e. when covering a significant number of data subjects, also considering the volume of data involved, as well as the duration, frequency and geographical extent of the processing carried out; and
• the processing of personal data which may significantly affect the interests and fundamental rights of the holders, which shall be characterized, inter may other situations, in those where the processing activity may prevent the exercise of rights or the use of a service, in addition to causing material or moral damage to the holders, such as discrimination, violation of physical integrity, the right to image and reputation, financial fraud or identity theft.

As specific criteria, four hypotheses are foreseen:

• the use of emerging or innovative technologies;
• surveillance or control of publicly accessible areas;
• decisions taken solely on the basis of automated processing of personal data, including those intended to define the personal, professional, health, consumer and credit profile or aspects of the personality of the holder; and
• the use of sensitive personal data or personal data of children, adolescents and the elderly.

Still on the subject of high risk, as this is a complex issue, the Regulation itself provides that the ANPD will be able to provide guides and guidance in the future, with the aim of assisting small treatment agents in the assessment of high-risk treatment.

Measures bring cost reduction

Another relevant mitigation in the regulatory burden concerns the obligation to record transactions involving the processing of personal data (ROPA – record of processing activities). Under the new regulation, small agents can record personal data processing operations in a simplified manner, according to a model yet to be provided by the ANPD.

In relation to the person in charge of personal data, by many known as DPO (Data Protection Officer), small agents, such as Startups they will no longer be obliged to indicate that figure, as required by Article 41 of the LGPD. However, this exemption does not exempt them from providing a communication channel with the data subject to comply with the provisions of Article 41, § 2, I, of the LGPD, which provides as the activity of the person in charge "accepting complaints and communications of the data subjects, providing clarifications and adopting measures".

The ANPD has also relaxed the safety incident communication by indicating that it will have the issue in simplified procedure under specific regulations.

Regarding deadlines, there is flexibility for small-sized agents, including Startups. The regulation grants them double term in cases provided for by law, in clear recognition of their condition and smaller service structure.

In addition, small processing agents may establish a simplified information security policy, which includes essential requirements for the processing of personal data, in order to protect themselves from unauthorized access and accidental or unlawful situations of destruction, loss, alteration, communication or any form of improper or unlawful processing.

No less important is the permission granted to small treatment agents and Startups, including those who carry out high-risk treatment, to organize themselves through entities representing the business activity, legal entities or natural persons for the purposes of negotiation, mediation and reconciliation of complaints submitted by data subjects.

The ANPD may ask the entrepreneur to prove the framework of his company. In other words, the data protection authority may require proof that business activity is a startup (or small business in general). The deadline is 15 days to meet the requirement.

Privacy by design

Although not expressly mentioned in the new ANPD Regulation, the concept of privacy by design is an important tool at the disposal of Startups for risk management and compliance with personal data protection standards. Although not explicitly mentioned in the regulation, it reflects the need to incorporate the culture of data protection into the business, including those in the pre-operational phase, since the design of the technology.

This is even more relevant in the innovation environment of Startups, considering that decisions made during the design of the business can have long-term impacts, impairing the company's ability to generate value, project repetition and gain scale. Implementing data protection from the design of the project, therefore, should be a priority, mainly because of the growing wave of cyber-attacks that affects from large corporations, such as companies with stock exchanges, to small companies and Startups.

^[1] Nthe terms of Order 41/2021/SG/ANPD.

^[2] Mapping of the Brazilian Startup Ecosystem 2021.