Publications

Category: Labor and employment

With the enactment of Federal Law No. 13,467/2017 (the Labor Reform), various provisions of the Consolidated Labor Laws (CLT) have undergone significant changes, and a number of them have been incorporated into social security legislation through specific adjustments in Federal Law No. 8,212/91. Among the topics common to both universes, the controversy over the legal nature and the form of medical care granted by the company to its employees deserves special mention.

Prior to the Labor Reform, the understanding prevailed that medical care should be granted to all employees, with the majority interpretation by the administrative bodies being that this benefit should be provided in a uniform and homogeneous manner, without any distinction in the levels of values ​​and coverage offered, regardless of the position occupied in the company.

In the event of noncompliance with these requirements, whether by not granting the benefit to all employees, or by granting it in a different form among them, the understanding was that the amount allocated to the payment of the medical care should: 

• be integrated into employees' remuneration for all legal purposes, thus affecting the payment of salary and severance payments paid to them during the period; 

• be integrated into employees’ salary-contribution, especially for the purposes of application of contributions due to Social Security.

This understanding was the result of the interpretation conferred by the courts and administrative agencies to item "q" of paragraph 9 of article 28 of Federal Law No. 8,212/91, according to which the salary-contribution does not include amounts related to medical care when such coverage extends to "all of the employees and managers of the company."

The expansive interpretation given to the above provision led to the understanding that the mere existence of asymmetrical levels of types of plans and coverages would be sufficient to disqualify the medical benefit even if the position, remuneration pattern, or responsibility of the beneficiaries were not equivalent.

This position was based on the understanding that the mention of all the employees referred to in the law not only included the benefit for all the employees, but also at identical levels for all.

The Labor Reform changed this scenario substantially. First, by inserting paragraph 5 in article 458 of the Consolidated Labor Laws, providing that the value of medical or dental care, even when it is granted via different types of plans and coverage, is not included in employees' remuneration, nor in their salary-contribution. Secondly, therefore, it made an incisive change in the wording of the provisions of Federal Law No. 8,212/91 to specifically remove the final section, which mentioned all employees and managers of the company. The table below highlights the changes:
 

An unequivocal fact is that the express wording no longer requires that medical care be provided to all employees. The concern of the Labor Reform in excluding precisely this language should not be disregarded, thus indicating the purpose of the proposed change.

Exactly for this reason, it is expected that the case law will adjust its position to the new legal provisions and, as a consequence, it will take the position that companies are no longer required to provide equal medical care to all their employees, therein maintaining the exclusion of these amounts from the concept of remuneration and, therefore, the calculation basis for salary, severance, and social security contributions.

Another possible interpretation, considering the changes imposed by the Labor Reform, would be that not only can companies grant medical care to their employees and managers at different levels, but they can also offer the benefit exclusively to some select workers, to the detriment of the others, without this, in itself, nullifying the nature of the granted benefit.

In that case, the deletion of the expression linking the benefit to "all of the employees and managers of the company" would be interpreted in its most pure and logical form. Before the rule inured to the benefit of all employees; now it is no longer necessary to extend the benefit to all.

Since the amendment is recent, there is still no guidance on the interpretation that will prevail in our courts. A conservative stance may be adopted to indicate that the benefit should be granted to all, even if with variations, in order to ensure legal protection. One alternative will be to recognize that the all-employees requirement has been eliminated with the removal of the language from the law, and it is up to the employer to offer the benefit to those it deems appropriate.

In addition, it is important to be aware that before any decision is reached in this regard, it is imperative that companies consult the collective bargaining rules applicable to their employees.

In fact, the Labor Reform, by raising collective bargaining to a level superior to the legislation itself, requires businesses to turn their attention to the particularities of each professional category. Thus, if the collective bargaining instrument requires granting medical care to all employees, or forbids any distinction in the form of coverage, it will be up to the company to comply with this obligation or to renegotiate this requirement through its employers’ union or collective bargaining agreement.

We can conclude that, as long as the collective bargaining rules and the prohibition on unfavorable contractual amendments are respected, it is fitting that companies, given the current nature of the change, carefully reevaluate the medical benefit offered to their new employees, as well as the levels and conditions which prevail among employees already benefited.

Category: Real estate

CVM Instruction No. 602, published on August 27, sets forth rules regarding public offerings of hotel collective investment contracts (CICs), the so-called condo-hotels. It repealed CVM Resolution No. 734/2015 (as amended by CVM Resolution No. 752/2016), which until then regulated the matter.

During the time CVM Resolution No. 734 was in force, offerors were obliged to comply with the provisions of CVM Instruction No. 400/2003, which waived the need for registration of the offer and the payment of any fees to the CVM. This changed with CVM Instruction No. 602, which is exhaustive in stipulating that "the provisions in the specific regulation on public offerings of securities do not apply to public offerings of hotel CICs." In addition, it is mandatory to register the condo-hotel offering with the Superintendence of Securities Registration (SRE), via a request for registration, which must be accompanied by proof of payment of a CVM inspection fee, among other documents.

The change in the definition of "offerors" brought about by CVM Instruction No. 602 deserves special mention. According to the new instruction, the developer and any other person that performs acts of public offering of hotel CICs are considered offerors. Therefore, the operator of the hotel development no longer fits, as a rule, within the concept of an offeror, unlike in the previous rule. Accordingly, the CVM was of the position that "in effect, the offeror is the one who, in fact, makes efforts to place the hotel CICs", therein recognizing that "[the hotel operator] is not usually responsible for the sales efforts of hotel CICs and, therefore, does not fit within the concept of offeror." But even without necessarily appearing as an offeror, hotel operators remain obliged to observe some rules regarding the disclosure of financial information concerning the development and hiring independent auditors.

Other important changes were (i) the possibility that the condominium owners may, gathered in a general meeting, as of the third year after the date of the disclosure of the annual audited financial statements in which the hotel operating income was recognized for the first time, waive the need for the hotel operator to prepare and make available to the public annual financial statements of the hotel development audited by an independent auditor registered with the CVM and quarterly financial statements pertaining to the hotel development, accompanied by a special review report issued by an independent auditor registered with the CVM; and (ii) the lack of approval by the CVM of the advertising material(s) to be used in the scope of the offer, without prejudice to the possibility that the offeror may submit, all at once, such material(s) for approval by the agency, together with the application for registration of the offering.

The table below compares the main rules applicable to offerings of hotel CICs, before and after the issuance of CVM Instruction No. 602:

CVM Instruction 602 only applies to offerings of hotel CICs referring to autonomous real estate units that are part of developments created in the form of condominiums. Public offerings of condo-hotels structured in the form of sale of fractional units of voluntary condominiums, which were also covered by Resolution No. 734, must comply with the provisions of CVM Instruction No. 400. We believe, notwithstanding, that the CVM may accept the adoption of differentiated placement regimes for offerings of hotel CICs involving efforts to sell the units of voluntary condominiums, in the same way as was already the case with Resolution No. 734.

The CVM maintained the need for the offeror to demonstrate that the right of withdrawal of the purchasers of CICs from the same project, distributed after April 18, 2016, the date of publication of CVM Resolution No. 752, without registration or waiver of CVM registration, given that such placement is considered irregular by the agency.

CVM Instruction No. 602 entered into force on the date of its publication. Its provisions are immediately in effect, observing that, for offerings that have already been exempted from registration on the date of publication, the offerors may continue to follow the provisions of CVM Resolution No. 734 and, consequently, CVM Instruction No. 400. Alternatively, they may follow the regime established by the new instruction, including with respect to the content and updating of the prospectus and the economic and financial feasibility study of the development and as regards the possibility of waiving the preparation of financial statements, as indicated above. For this, the offerors will need to submit a report to the CVM within 60 business days from the date of entry into force of CVM Instruction No. 602. For offerings that are subject to a request for waiver by the agency, the offerors may, alternatively, continue to follow the provisions of CVM Resolution No. 734 and, consequently, CVM Instruction No. 400, or submit a new application for registration, wherein it observes the new instruction in full.

Instruction No. 602 finally fills a regulatory gap regarding the issue, which gained prominence in 2013 after the suspension of various offerings by the CVM, and resolves the debate regarding the classification of hotel operators as offerors, which has been generating much debate since the publication of Resolution No. 734, on March 17, 2015.

Category: Infrastructure and energy

Awaited since November of 2017, the Sanitation Presidential Decree was finally promulgated on July 9. Despite the differences with respect to the versions submitted for public consultation, the rule maintained its foundations, which, if confirmed via its conversion into law, will increase the participation of private enterprise in the sector, thus favoring the structuring of new projects.

Initially, the Presidential Decree reconfigures the National Water Agency (ANA), giving it new functions. It is worth mentioning the jurisdiction to issue national reference standards for the regulation of basic public sanitation services. These rules will have the potential to reduce the regulatory patchwork that afflicts the sanitation sector, in which each municipality has the autonomy to prepare its own contractual modeling solutions. Perhaps the only existing standard is established by the most consolidated state companies in the restricted regions where they operate. Regulatory uniformity and legal certainty were old demands of investors and financiers, interested in mitigating transaction costs that often jeopardize ventures.

To ensure the effectiveness of national reference standards, it is essential to condition access to federal resources and financing granted by entities controlled by the Federal Government on compliance with established standards: states and municipalities, or companies that contract with them, when they resist compliance with ANA, may be deprived of onlending and credit lines, without which few sanitation projects are financially viable.

ANA also becomes a mediating and arbitration body for the public administration: in the event of conflict between municipalities, states, and/or their respective regulatory agencies and public sanitation service providers, the national agency may operate through voluntary and consensual submission of all those involved to a true and specialized permanent arbitral tribunal, aimed at resolving regulatory and/or jurisdictional conflicts, especially among states.

Another innovation of the Presidential Decree refers to metropolitan regions, urban agglomerations, and microregions: in them, the exercise of ownership of public sanitation services was assigned to the interfederal collective body created and constituted in light of the Statute of the Metropolis. The measure puts an end to a conflict of jurisdiction that has led to the filing of at least three direct actions of unconstitutionality against state laws on sanitation services in metropolitan areas.

In its judgments, the Federal Supreme Court then pointed to the need for states and municipalities to agree on and share decisions when there is a common interest in sanitation projects. There will also be discussion on how to structure and set up such interfederal collective bodies, especially their rules of governance regarding the right of veto by participants, deadlock situations, and financial contributions: precedents from public consortia will be useful to guide, by analogy, the modeling of agreements between participants, where it is possible, in public functions of common interest, to recognize a more decisive role for the state.

State sanitation companies can now be privatized without their program contracts automatically losing their validity, and it is up to the municipalities served by them to decide whether or not to accept the new conditions for continuity of the service. The situation is close to that of authorization by the granting authority for the transfer of control of concessionaires, under penalty of expiration of the concession contract, under the framework of Law No. 8,987/95. If there is agreement, under the model of the Presidential Decree, adherence to the new conditions operates as a true conversion of the program contract, and the instrument calling for bids serves, in whole or in part, as the basis for an addendum that significantly changes the original agreement: a contractual arrangement between the acceding municipality and the privatized state company is now qualified as a concession, and the framework of Law No. 9,074/95 can be applied, notably the provision of article 28. In the absence of consent, the municipalities reassume the services delegated, but with the obligation to indemnify the investments made and not yet amortized or depreciated. The solution given by the Presidential Decree is imperfect since the lack of voluntary compliance can lead to the issuance of a mere request to the municipalities, with its known drawbacks.

Competitive processes for the conclusion of program contracts are no longer automatically waived. Before opting for the services of a certain state sanitation company, municipalities should issue a call for bids for other companies to express interest and present a more efficient and advantageous proposal: in the event that there is at least one interested party, along with the state company, the holding of a bidding process shall be legally obligatory. This is the only rule of the Presidential Decree that is subject to a three-year vacatio legis: while all other regulations have immediate and general effect, municipalities and state-owned enterprises will have a long period to adjust their needs or business models, as the case may be, to the new competition rule.

Still far from the objectives of universalization and ecological efficiency of sanitation services, Brazil cannot do without private capital to accelerate investments in an industry that generates so many positive externalities, such as basic sanitation. Whether it is the privatization of state-owned companies, concession modeling, public-private partnerships, sub-concessions, or subdelegations, the Sanitation Presidential Decree has enormous potential to energize new projects, structured with more regulatory framework and regulatory space for smart innovations.

Category: Infrastructure and energy

On May 29, the federal government published the initial drafts of the call for bids and concession contract for the new round of federal concessions, which will include 13 airports, distributed in three blocks:

Northeast Block: Recife (PE), Maceió (AL), Aracaju (SE), João Pessoa (PB), Campina Grande (PB), and Juazeiro do Norte (CE).

Southeast Block: Vitória (ES) and Macaé (RJ).

Central-West Block: Cuiabá (MT), Sinop (MT), Barra do Garças (MT), Rondonópolis (MT), and Alta Floresta (MT).

The contracts will have a term of duration of 30 years and may be extended once for up to five years, in cases where there is a need to re-establish the economic and financial balance resulting from an extraordinary revision. The modeling adopted does not provide for a restriction on the participation of the current concessionaires: the winners of previous bidding procedures can also enter the dispute for the blocks. As in the last round, consortia can be formed only by private companies, without obligatory participation of Infraero.

One of the main innovations of the fifth round is the split risk between the Federal Government and potential concessionaires. According to the proposed payment schedule, the initial contribution (amount to be paid by the concessionaire due to the offer made in the auction) must be paid before the concession contract is signed. Due to the high value of the investments necessary, a grace period of five years will be granted to start the payment of the variable contribution, an amount to be paid annually by the concessionaire and calculated based on the gross revenue received by it in the year prior to the payment. The way in which the variable contribution is calculated makes it possible to allocate the risk arising from a possible decrease in gross revenue.

After the ninth year of the concession, the calculation of the variable contribution will be done based on a fixed rate over the gross revenue, with 16.50% for the Northeastern Block, 2.06% for the Central-West Block, and 12.42 % for the Southeast Block.

As in the case of the fourth round of concessions, it will be mandatory for the airport operator to hold at least a 15% stake in the winning consortium. With regard to the technical qualification of the airport operator, the call notice has different requirements for each of the blocks. For the Northeast, the operator is required to prove it has experience in serving at least seven million passengers in at least one of the last five years. For the Central-West and Southeast blocks, minimum service to three million passengers must be demonstrated in at least one of the last five years.

The draft call for bids and contract are subject to change after public hearings and review by the Federal Accounting Court. English versions of the documents have already been released.

The expectation of the federal government is that the bidding will take place in 2018. However, election campaigns may influence the schedule, thus lengthening the process of privatization of airport assets.

Category: Real estate

On October 6, a plenary session of the Chamber of Deputies approved the text of Law 10,728/2018, replacing the text proposed by means of Law No. 1,220/2015, which regulates the termination of contracts for the acquisition of real estate.

The purpose of the text is to amend Law No. 4,591 of December 16, 1964, and Law No. 6,766, of December 19, 1979, which regulate, respectively, real estate development and urban land subdivisioning. The highlight of the proposed text is the provision of express rules on the consequences of the discontinuation of contracts concluded for the acquisition of real estate in the scope of real estate developments, whether arising from default by the purchaser or developer.

If it is converted into law, the current wording of the draft bill will maintain the right recognized by case law for the purchaser to rescind or terminate the contract, and the developer must pay back the amount paid up to that time, less (i) the brokerage commission and (ii) a maximum of 50% of the other amounts paid by the purchaser, if the development is subject to the affectation regime, or a maximum of 25% of other amounts if the development is not affected. If the original purchaser is able to transfer its contractual position to another person, the penalty will not be due.

In cases where the contract is dissolved when possession of the property has already been taken, the purchaser must also pay an amount corresponding to the enjoyment of the property (as agreed upon in the contract or, if not agreed upon, as established by law), in addition to the condominium quotas and fees due in relation to the property.

In addition to providing legal certainty in settling the percentage of the penalty applicable, the approved wording runs contrary to the former understanding of our courts (which provides for immediate return), thus granting the developer a term to repay the former purchaser as follows: 30 days as of the issuance of the local authority’s certificate of acceptance of occupancy in cases in which equity is affected; up to 180 days from the termination of the contract in cases where there is no separation of property; or, in case of resale of the unit, within up to 30 days after the transaction.

The new law, if approved with the current text, will also settle the admissibility of a 180-day tolerance for the completion of construction, provided that such term has been clearly and expressly stated by the developer when the unit is sold. That is, a delay shorter than the grace period will not be accepted as a scenario for termination of the contract. After this deadline expires without due delivery, the purchaser may opt for (i) termination of contract, being entitled to the full receipt of the amounts paid, in addition to a fine; or (ii) maintenance of the contract until the conclusion and delivery of the unit, in which case indemnification corresponding to 1% of the amount effectively paid to the developer for each month of delay will be due.

The approval of the bill will be an important milestone for the real estate market, which slowed considerably after the large growth between the "golden years" of 2010 and 2014 (boosted by an increase in the credit supply and investments in Brazil), as a reflection of the rise in unemployment, interest rates, the economic recession, and a large supply of real estate projects launched and to be launched. During this deceleration, seen mainly between 2015 and 2017, there was a staggering increase in the number of terminations: according to data from the Brazilian Association of Real Estate Developers (Abrainc), this total reached 34.8 thousand (equivalent to 32.3% of sales of new real estate) between November 2016 and November 2017, one of the main causes of applications for judicial reorganization that involved Brazilian developers since 2015.

The boom of terminations, coupled with the lack of regulations, resulted in a considerable increase in lawsuits in which the amount to be refunded to purchasers of autonomous units, who for the most varied reasons, sought termination of their contracts. Without uniformity in the understanding of Brazilian courts, most decisions did not take into account the whole chain that involves a real estate development. The viability of these ventures depends on the funds raised and is directly impaired in cases in which the developer is obliged to immediately return unreasonable amounts because of contractual terminations that are often unjustified. In such cases, the losses fall on both the completion of the development and the other purchasers, effectively jeopardizing the equity sought in our legal system to protect purchasers.

The text of the bill approved by the Chamber's plenary session is in line with the new jurisprudential trend observed since 2017 in some courts of the States of Rio de Janeiro and São Paulo, which began to investigate the type of purchaser involved in the lawsuit (whether consumers or investors); to not authorize termination of the contractual relationship without cause; and to grant time limits for repayment of the portion of the amounts paid to the investor purchaser (see TJSP: Appeal 1116739-74.2016.8.26.0100 10 and TJRJ: Appeals 0291672-78.2015.8.19.0001, 0031585-12.2016.8.19.0000, 0072679-03.2017.8.19.0000, and 017226-23.2017.8.19.0000).

If the proposed wording is approved in the Senate, and if there is no presidential veto, the entry into force of the bill will bring light to the countless lawsuits on the subject and will strengthen the resumption of the real estate market in Brazil.

Category: Tax

Today, the São Paulo State Revenue Service published two important normative acts related to the ICMS-ST: (i) CAT Notice No. 06/2018, which "clarifies ICMS reimbursement due to tax substitution, in view of the decisions rendered by the Federal Supreme Court in Extraordinary Appeal No. 593,849/MG and Direct Suit of Unconstitutionality ADI No. 2.777/SP” and (ii) CAT Ordinance No. 42/2018, which establishes the procedure to supplement and reimburse the withholding tax for substitution for the scenarios set forth in articles 265, 269, 277, and 426-A of the State’s ICMS Rules.

Specifically regarding CAT Communiqué No. 06/2018 and, for the purposes of contextualization, it is important to highlight that:

1. Extraordinary Appeal RE No. 593.849 originated from a writ of mandamus filed by Parati Petróleo, which sought to give a more expansive interpretation to article 150, paragraph 7, of the Federal Constitution, to the effect that the failure to carry out a presumed tax triggering event would cover both the scenario in which the presumed triggering event is not carried out and the scenario in which the triggering event is only partially carried out, that is, the situations in which the presumed calculation basis is higher than the real calculation basis; and
2. Direct Suit of Unconstitutionality ADI No. 2,777/SP was filed by the governor of the State of São Paulo, who sought a declaration of unconstitutionality of article 66-B, II of State Law No. 6,374/89, since this rule guaranteed the right to refund of the tax paid in advance "if it was proved that in the final transaction with merchandise or a service it is established that the tax obligation is less than the presumed value." In 2008, State Law No. 13,291 was enacted, which added paragraph 3 to the article in question, whereby it restricted the possibility of reimbursement of ICMS-ST to situations in which the final price to the consumer, single or maximum, is authorized by a competent authority.

On October 19, 2016, Direct Suit of Unconstitutionality ADI 2.777 and Extraordinary Appeal RE 593.849 were decided jointly, and the Federal Supreme Court, via a majority opinion, (i) granted relief to the extraordinary appeal based on the theory that "refund is due of the difference of the Tax on Circulation of Goods and Services (ICMS) paid in excess in the future tax substitution regime if the actual calculation basis of the transaction is less than the presumed basis"; and (ii) dismissed Direct Suit of Unconstitutionality ADI 2.777, thereby affirming the constitutionality of the contested state provision, which was in conformity with the decision reached under the framework of the general repercussion system for appeals.

In view of the theory established by the Federal Supreme Court, as well as the declaration of constitutionality of article 66-B of Law No. 6,374/89, various taxpayers submitted formal consultations to the State of São Paulo Revenue Service to clarify the restriction imposed by paragraph3 of article 66-B of the aforementioned law on the grounds that there was way to allow that paragraph to completely render ineffective the content of the head paragraph of that article.

In order to respond to the inquiries submitted, the Fiscal Tax Consultancy, in view of the jurisdiction of the Attorney General of the State of São Paulo to define interpretation of and compliance with judicial decisions, sent a letter requesting clarifications on the comprehensiveness of the understanding established by Direct Suit of Unconstitutionality ADI 2.777, in relation to paragraph 3 of article 66-B of Law 6,374/89. By means of PAT Opinion No. 03/2018, the State Attorney General's Office issued an understanding on the restriction of requests for compensation only to cases involving a final or single maximum price fixed by a competent authority (ruling out the interpretation that was being adopted by taxpayers).

Based on the position of the São Paulo State Attorney General’s Office, the Revenue Service published the aforementioned CAT communiqué, giving publicity to the understanding set forth in PAT Opinion No. 03/2018 and clarifying the understanding of the State of São Paulo to the effect that "there will only be a right to reimbursement of the tax paid in advance under the tax substitution regime when the final transaction with the merchandise or service is at a value lower than the presumed calculation basis, in situations in which the final single or maximum consumer price has been authorized or set by a competent authority (paragraph 3 of article 66-B of State Law No. 6,374/1989). In cases where the ICMS tax basis due via tax substitution is not fixed pursuant to article 28 of State Law No. 6,374/1989 (final consumer price, single or maximum, authorized or fixed by a competent authority), the amount of any tax withheld, which corresponds to the difference between the value that served as the basis for the withholding and the value of the transaction carried out with the final consumer, will not be subject to reimbursement."

Despite the reasons for the opinion and the CAT communiqué, we believe that the subject calls for debate, especially in view of the theory that has already been settled by the Federal Supreme Court in general repercussion.

Still in relation to the changes implemented by the State of São Paulo, the State Revenue Service, in addition to CAT Communiqué No. 06/2018, issued CAT Ordinance No. 42/2018, providing for ancillary obligations to be observed by São Paulo taxpayers in order to submit a request for reimbursement or supplementation of the ICMS-ST, in the scenarios set forth in articles 265, 269, 207, 277, and 426-A of the State's ICMS Rules.

Specifically as regards the procedure for reimbursement, according to the Revenue Service's own understanding, it does not apply to cases in which the ICMS calculation basis due via tax substitution is not fixed pursuant to article 28 of State Law No. 6,374/1989 (final consumer price, single or maximum, authorized or fixed by a competent authority). In this sense, only in cases of (i) presumed and unrealized tax triggering event; and (ii) sale of the product at a value below the final consumer price, single or maximum, authorized or fixed by a competent authority, would it be recoverable. For other cases, the São Paulo taxpayers would still go without the possibility of reimbursement.

As stated on the agency's own website, the São Paulo State Revenue Service’s intent was to improve the ICMS-ST's reimbursement calculation system, including the guidelines of the "Non-Conforming" Program, in order to simplify compliance with obligations imposed by the State through modernization of information systems. In this sense, the implementation of the new model standardized by CAT Ordinance No. 42/2018 aims to guarantee greater legal certainty to taxpayers in the process of reimbursement and greater efficiency of the Tax Authorities in assessing the information provided.

Although this is not expressly stated in the ordinance, the São Paulo State Revenue Service has already declared that the agility of the new system allows the taxpayer to receive, within 24 hours, via the Taxpayer’s Electronic Domicile (in Portuguese Domicílio Eletrônico do Contribuinte, abbreviated as DEC), an electronic code confirming reception of the file, in order to immediately use the amount of the credit.

With respect to this content, pursuant to article 20 of CAT Ordinance No. 42/2018, the use of the amount reimbursed may occur in the following ways: (i) book-entry offset by the establishment, as per item I of article 270 of the ICMS Rules; (ii) transfer to a tax substitute, registered in the State of São Paulo, provided that it is a supplier, or for another establishment of the same company, according to item II of the same article 270; (iii) request for reimbursement, with a view to depositing the funds in the São Paulo taxpayer’s bank account, to be performed by a tax substitute responsible for withholding the merchandise tax, as per item III of article 270; (iv) settlement of the tax debts of the establishment, or another of the same holder, or of third parties, subject to the rules of articles 586 to 592 of the ICMS Rules; or (v) as previously established in a special regime held by the taxpayer.

Another novelty already governed by article 13 of the ordinance is the Electronic System for Reimbursement Management (e-Reimbursement), which will come into force in March of 2019 and will allow consultation of the current account for control of reimbursements. It will also be possible to receive in it electronic messages integrated with DEC; check the status of files being processed; request registration of tax to be refunded; use the tax to be offset to offset, transfer, or settle tax debt; replace files and record the tax transfer.

Pursuant to article 1 of the Transitional Provisions, the substituted taxpayer is entitled to apply the methods of calculating the reimbursement provided for in CAT Administrative Ordinance No. 158/2015, replacing the calculation method established by the new ordinance, subject to the following conditions: (i) only in relation to events that occurred between May 1, 2018, and December 31, 2018; (ii) by entering it into the ICMS Registry Book in the period from May to December 2018; and (iii) the taxpayer, for the period in which it exercised the option provided for in the head paragraph, does not transmit to Sefaz the digital file defined in paragraph 2 of article 1 of the new ordinance.

In spite of the claim by the São Paulo State Revenue Service that it is expediting and providing greater security to ICMS-ST reimbursement transactions, we believe that the topic will also involve a lot of debate, especially due to (i) revocation of the decrees CAT No. 17/1999 and 158/2015 (which contained the general rules for ICMS-ST reimbursement); and (ii) linking the application of CAT Ordinance No. 42/2018 only to the scenarios set forth in articles 265, 269, 277, and 426-A of the State’s ICMS Rules.