quarta-feira, 24 de maio de 2017

'Manual on Petroleum Law in Brazil' - Book Launch | Brazilian Chamber of Commerce for Great Britain

'Manual on Petroleum Law in Brazil' - Book Launch | Brazilian Chamber of Commerce for Great Britain:



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Tratado de Extradição entre Brasil e Índia

Foi publicado hoje. Chamou minha atenção.



D9055: "Tratado de Extradição entre a República Federativa do Brasil e a República da Índia"



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TRATADO DE EXTRADIÇÃO ENTRE A REPÚBLICA FEDERATIVA
DO BRASIL E A REPÚBLICA DA ÍNDIA
A República Federativa do Brasil
e
A República da Índia
(doravante denominadas “as Partes”),
Desejando uma cooperação bilateral mais eficaz na supressão do crime por meio da extradição dos criminosos;
          Reconhecendo que são necessários passos concretos para combater o crime organizado transnacional e o terrorismo;
Desejando tornar mais efetivos os esforços de combate à impunidade; e
Respeitando os princípios da soberania, da não-interferência em assuntos internos de cada uma das Partes e as normas do Direito Internacional,
          Acordam o seguinte:
Artigo 1
Da Obrigação de Extraditar
            As Partes extraditarão qualquer pessoa que se encontre em seus respectivos territórios, contra quem exista um mandado de prisão, expedido por juiz competente, por um crime extraditável, ou que tenha sido condenada por crime extraditável no território da outra Parte, nos termos deste Tratado, tendo sido o crime cometido antes ou depois da entrada em vigor deste Tratado.
Artigo 2
Dos Crimes Extraditáveis
1. Um crime será extraditável se, de acordo com as legislações de ambas as Partes, for punível com privação de liberdade ou prisão por um período de pelo menos um ano, ou com pena mais severa.
2. Se a extradição for solicitada para o cumprimento de sentença imposta na Parte Requerente, a duração do que resta a cumprir da sentença deverá ser de pelo menos um ano.
3. Um crime também será considerado extraditável se envolver tentativa ou associação para cometer, ajudar ou incitar a cometer crime, ou cumplicidade anterior ou posterior ao crime descrito no parágrafo 1.
4. Para os propósitos deste Artigo, um crime será considerado extraditável:
a) quando for solicitada a extradição de uma pessoa por crime contra legislação relativa a matéria tributária, alfandegária, cambial, de lavagem de dinheiro ou outros assuntos financeiros. A extradição não será denegada mediante alegação de que a legislação, da Parte Requerida não impõe o mesmo tipo de imposto ou taxa, ou não contém regulamentos do mesmo tipo que os da legislação da Parte Requerente no tocante a impostos, taxações, alfândega ou câmbio;
b) independentemente de a legislação da Parte Requerente classificar o crime na mesma categoria ou descrevê-lo com igual terminologia.
5. Se a extradição foi concedida para um crime extraditável, também o será para qualquer outro crime especificado no pedido, mesmo que a pena para esse tenha duração menor que um ano de privação de liberdade ou prisão, desde que todas as outras condições para a extradição sejam cumpridas.
Artigo 3
Dos Crimes Compostos
De acordo com o presente Tratado, poderá ser concedida a extradição para crime extraditável ainda que a conduta, parcial ou integral, da pessoa procurada tenha ocorrido na Parte Requerida, e se, de acordo com as leis desta Parte, a referida conduta e seus efeitos ou seus efeitos intencionais, como um todo, forem considerados cometimento de um crime extraditável no território da Parte Requerente.

terça-feira, 23 de maio de 2017

Power of Attorney for setting up a company in Brazil – new rules

In order to incorporate a company in Brazil, the foreign investor must appoint a local representative who lives in Brazil.

Traditionally, this representative was required to have powers to receive court summoning and to answer to any civil subpoenas directed at the foreign investor.

This makes sense under Brazilian procedural law, that puts a lot of focus on making sure that respondents will be properly summoned to present his defence in administrative or judicial procedures. Rulings “in absentia” are exceptional.  By requesting the nomination of a Brazilian resident as representative of the investor, Brazilian authorities would always have someone close enough to be summoned by ordinary means (without the need for international communications between courts, etc.).

This is the basic idea.

Now, since Brazil is a very bureaucratic place, people soon noticed that is would be a waste of time to issue a one-line PoA, considering that several other actions also require a power of attorney. For example: registration of the investment before the Brazilian Central Bank, clearance of foreign currency exchange agreement, etc.

Not to mention that any alteration to the articles of the company, such as increase in equity or appointment of new directors, would also require the investor to sign the documents himself, or to name a proper representative in Brazil with powers to do so.

All things considered, a proper PoA would have 3 pages and a LOT of very specific powers.

Now, this “excess” of powers has contributed to a problem. Brazilian courts started to consider that this all-powerful attorney would act, in practice, as a company director. Thus, labour and tax courts started to redirect debt collection suits to the Brazilian representative, whenever the company didn`t have enough assets to pay for the debts.

This situation, albeit technically illegal, has persisted for some time.

Recently, the Brazilian Revenue Service has tried to make the representative`s personal liability official. It issued an administrative ruling stating that any foreign company looking for enrolment before the national taxpayer`s registry (the famous CNPJ) must name a local representative with full powers to manage the investor`s assets in Brazil.

By choosing these word, the Brazilian Revenue Service made clear that the local representative will be considered a kind of local manager, not only a representative able to receive summoning.

Please notice that the enrolment with CNPJ is one of the first steps required in order to incorporate a new company in Brazil, in case the foreign investor is a corporate entity (not an individual).  Therefore, there is no way around this requirement.

And this is not the only recent change.

The federal body responsible for standards in corporate regulation issued new guidelines in 2017. They include a provision requiring that all powers of attorney from foreign investors must not have a time limit. This is to say, they must be valid until a formal cancellation is filed before the Commercial Registry.

The two alteration, combined, result in a local representative that:

a)    Has powers to manage the investor`s assets in Brazil (to control the company);
b)    Is liable for company`s debts, since he will be considered a sort of director;
c)    Has power for an unlimited period of time, until he gives up the job or until his PoA is formally cancelled.

The situation is awkward, to say the least.

It has forced the new PoA documents to become even longer. Now they must include:

a)    Provisions for cancellation;
b)    Protection against tax and labour liability;
c)    Restrictions on powers, to prevent the representative from “taking over” the company.

So, there is little chance you will find a good template for a PoA, readily usable.




domingo, 21 de maio de 2017

Branch or subsidiary in Brazil?

Here is part of an email exchange with a potential client. 

We were discussing the differences between having a branch in Brazil or incorporation a new company, owned and controlled by a foreign entity. 

  • What is the procedure to create a branch. What has changed lately?
​The branch (filial) requires express approval by the Federal Government. This is not a new procedure. The approval has been required for decades. 

The changes in procedure are regarding the new model of power of attorney that must be used. But this is a relatively small change.  

  • How much time does the special approval take (on top of the usual time for incorporation of a new company)?
​Between 40 to 60 days. ​
 

  • How could a new company be controlled by a foreign investor?
​The procedures for incorporation of a new company with foreign partners are, broadly speaking, the same procedures required to open a regular Brazilian company, with Brazilian owners. Therefore, we will avoid the need for Federal approval, which is part of the process of creating a branch.

The new company would be owned and controlled by the Swiss company. It would also need another partner, which can be another Swiss company, a Swiss investors or a Brazilian investor. 

Please notice that the new company may be 100% owned by Swiss investors. There is no need for a Brazilian partner.

  • Is there any down side of using a subsidiary (new company) instead of a branch?
​Basically, no. ​
 
​The Brazilian entities would work just the same. Actually, a new company is subject to less government control and scrutiny than a branch. ​

  • Would it be legal for the investing company abroad and the new company in Brazil to conduct transactions and have financial ties?
​Yes. They would be subject to the exact same rules (transfer pricing rules, tax rules, etc.) that would apply over a transaction between an investing company and its branch in Brazil.

  • How long does it take to open a new company? 

​About 60 to 90 days, depending on the amount of documents to be translated. ​

quarta-feira, 12 de abril de 2017

Upcoming changes in purchase of land by foreigners

From my twitter feed;


The President's Chief of Staff Office in Brazil has just finished up a bill that frees the purchase and lease of land to companies with foreign control, without setting area limits as always defended by the forestry sector and farm caucus in Congress. The project is ready for voting in the Chamber of Deputies floor, but there is still a dispute among deputies of President Michel Temer’s allied base about who will sponsor the bill. In the text to which Valor had access, foreign companies or citizens are prevented from owning or leasing together more than 25% of a municipality’s territory. And it forbids foreign companies or persons of the same nationality from owning land that accounts for more than 40% of a city's territory. These rules are not valid if the foreigner marries a Brazilian citizen in communion of goods. There is still no date for the vote.

domingo, 9 de abril de 2017

Brazil: Tax is not the issue. Variations, complexity and indirect cost to manage it it the true grit. | Carlos Frohlich | Pulse | LinkedIn





A very interesting article about the connection between taxation and IT in Brazil.


I`m learning that this is becoming a big thing.  Some of my clients already pick accountacy firms based on the firm`s ability to cope with their ERP systems.


Link to the original source.


Brazil: Tax is not the issue. Variations, complexity and indirect cost to manage it it the true grit.

It has been a while since I have started to work for multinational companies with operations in Brazil.

For IT consultants there is a common ground when the subject is taxes. Goosebumps would describe this feeling. Most of the international teams do not realize how complex Brazilian taxes can be.

 Few tributes… so what?

 There are indeed few tributes but as you will see bellow, there are a wide range of creative variations and many special categories. Exceptions everywhere. Indeed a quite complex environment to manage but not only. There are also many different mandatory reports to allow the Brazilian government to cross those information clusters. Government considers not only the data from one source but through big data, it crosses data from vendors, customers and similar companies to build the big picture about an industry, about a market segment and even about the company and its peers. This strategy is about not only the source (provided by the company) but also the exchanged data between different companies. The best example is the mandatory NFe (electronic invoice) that allows Brazilian Government to control and track down electronically any fiscal information about goods logistics.
 A BRIEF OVERVIEW OF BRAZILIAN GOVERNMENT STRUCTURE AND TAX POLICY
 When the context is about Brazilian legislation within the context of tributes, taxes, and other compulsory fees, we are commonly referring into a very dynamic environment that uses many different rules. While in many countries there is only one "VAT" and few variations around this theme, Brazil has a wide range of rules regarding taxes and tributes and every year many variations are created (and/or extinguished).
 The true cost is about not only the taxes but also the IT and Business Impact cost to arrange information to such complex environment
 Few taxes in numbers: 5570 possible tax rates for ISS, 27 x 2(1) x N combinations for ICMS, IPI have its own set… and keep going
+8100 regulation changes during the year of 2013
 It is not an easy tax to set all those Tax formulas and keep it updated. A purchase order wrongly set will have a huge impact.
 Before proceed within this subject better to explore a bit about the political structure. Brazil exists on a political framework of a federal presidential representative democratic republic therefore the President is both head of state and head of government but Senate regulates his actions. Brazilian electoral systems relies on a multi-party system that requires a major effort to align interests before any political decision.
 The political and administrative organization of Brazil that comprises the federal government, the states, the federal district and the municipalities* therefore three levels of government, often referred in Portuguese as “esferas”: “federal”, “estadual” and “municipal”. (*Cities and its surrounding areas which comprises a unique structure to manage its government/political whereabouts). Federal district feel into a special condition in which is Municipality and State at the same time.
 The federal government exercises control over the central government and separated into three independent branches: executive, legislative and judicial. There are tributes attributed to each ESFERA that allows layers of control over the tax rates and special cases.  
Brazil has 5.570 municipalities, 26 states and 1 federal district, therefore 27x2 possible combinations for ICMS tax rates, 5570 possible tax rates for ISS and so on. Brazilian legislation allows a huge set of possibilities for the tax variations and this complex fiscal environment has been continuously criticized everywhere in the society but without any real movement to change. We are not talking only for ICMS (state of origin and state of destination) but also variations for ICMS for each state which multiplies the combination 27x2 by N of special conditions. As per special condition, we can mention one example: There is a different tax rate for finished product whenever the % of imported raw material (overseas) corresponds to more than X% of the total production cost. Can you imagine the effort to track down the stocks (could have mixed raw material), production orders, BOM and then change the tax during the invoice creation.
Brazilian fiscal regulations have many changes across the year. According to a Brazilian wide publication, it states +8100 regulation changes during the year of 2013. Due this particular characteristic of Brazilian regulations, Fiscal area always requires a great deal of effort to follow up those changes. Of course not all changes will have impact on IT but requires an effort to read, understand and decide whether apply or not to the ERP.
 Because the environment is so diverse and has a wide range of rules, controlling and reporting to the government, Fiscal environment could be considered doomed because to manage such complex environment would easily lead to Chaos. There is a game change. Recently (3 years or so), Brazilian government has been creating more and more serious and automatized controls to avoid fraud and tax evasion using concepts of Big Data. Those electronic controls are demanding more and more from the companies and several “Obrigações Acessórias” which are very specific mandatory reports to be provided to the different government “esferas” which purpose is to cross data therefore provide internal reports leading to the Fiscal department to apply heavy fees to the companies.
 Auditing suddenly got a lot easier meanwhile companies now need to be very careful about the quality of the provided information.  Any GAP could lead into an audit.
 In order to meet those legal requirements, companies are struggling to keep the pace and provide information to the Government. Many of the core reports created in flat files format also have a prior validation by a Brazilian Software before delivery. This software provided by the government cross many of the information in order to guarantee the minimum condition of quality has been set.
 For many big companies, a budget bigger than 500K R$ a year are required only to handle this Brazilian fiscal frenzy. Of course, there are many third part software provided by independent companies that gather the required data from ERP in order to provide cross validations and the presents the report. Choosing carefully this software is a big strategy because whenever an audit team arrives, the document drill down and correct correlation between report and accounting and fiscal data is the key to success and the better way to avoid penalties.
 ECF, SPED and a New age of control
 With effect from 1 January 2008, Brazilian corporate taxpayers are required to record electronically every tax and accounting operation to comply with the “federal”, “estadual” and “municipal” tax authorities: SPED system. Brazilian Digital Bookkeeping System (SPED – Sistema Público de Escrituração Digital) is based on the creation of the Nota Fiscal Eletrônica (Electronic Invoice – NFe), the Escrituração Fiscal Digital (Digital Tax Bookkeeping System) and the Escrituração Contábil Digital (Digital Accounting Bookkeeping) systems. Companies send electronically all related data about those and also other required information (obrigações acessórias) into Government Databases and through those, the Brazilian government can track down the Accounting and Fiscal whereabouts from all companies.
 The actual Brazilian tax model is imposing a considerable volume of duties, that has direct impact in billing, invoice processing and compliance with tax obligations, requiring changes in IT, setting constrains on how to manage business processes. 
 Back to 2011 Brazilian Government imposed more rules regarding digital bookkeeping requirements. Brazilian tax authorities have had shown a roadmap of additional initiatives (few already has a defined due date but there are other yet in progress), such as Electronic Services Invoices (NFS-e), Taxable Income Computation Book (ECF), e-Social (SPED Payroll), Bloco K - SPED Stock (Inventory Manufacturing Control) and so on. Because the Tax scenario is so complex and often there are changes in the regulations/shared model up to few weeks before the obligation delivery, it is hard to keep the solution required at the speed of the changes required by the government. Those changes happens due rules clarification, result of legal interventions and other external factors. For example, for one of those main obligations, ECF**, it happened weeks before the due date. The software in charge to validate the report got 3 different versions 2 weeks before the delivery date. It is an IT nightmare for anyone.
Overview: 
N "Obrigações acessorias": Fiscal control cross check. A retail company present in 15+ states and 40+ cities could have 80+ "obrigações acessórias" reports to provide
SPED Fiscal Bloco K: Need to provide raw material stock, production order and raw material consumption for each order and then finished products
SPED Fiscal: What, when, from where the company did buy at which tax rate
SPED Contábil: Accounting reports
SPED ::: ECF (Escrituração Contábil Fiscal):  It is a new obligation required by law to all companies that have operations in Brazil. ECF is an evolution of previous tax related deliverables replacing the previous reports of DIPJ (Declaração de Informações de Pessoa Jurídica), CSLL (Social Contribution on Profits), LALUR (real/deemed profit - Livro de Apuração do Lucro Real) and others. It also requires an additional handling of a broaden set of information for tax tracking purposes and other outputs generated for other obligations like SPED Contabil (ECD - Escrituração Contábil Digital).










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2017 Ranking of the Best Arbitration Centers in Brazil

The ranking has been published by "Leaders League". 

I basically agree with their evaluation. 

AMCHAM is located in my city (Belo Horizonte) and I know them very well. 

CAM-CCBC (the chamber from the Brazilian-Canadian chamber of commerce) and AMCHAM chamber are also very good. 

They are on the top of the list. This matches the feedback I get from clients and colleagues. 



2017 Ranking of the Best Arbitration Centers in Brazil:






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quarta-feira, 8 de março de 2017

Basic transfer pricing rules in Brazil

Pursuant to Art. 18 of Statute 9.430/96, the Transfer Pricing regime applies to the import and export operations of goods and services between related legal entities.

Under Art. 23 of Statute 9.430/96, the following should be considered connected or related to a Brazilian entity:

a)      their headquartes located abroad;
b)      their branch, if located abroad;
c)      the individual or legal entity, resident or domiciled abroad, whose ownership interest in its capital stock characterizes it as its parent or affiliate company, as defined in paragraphs 1 and 2 of art. 243 of Statute 6.404/1976;
d)      a legal entity domiciled abroad that is characterized as its subsidiary or affiliated, as defined in §§ 1 and 2 of art. 243 of Statute 6.404/1976;
 e)      a legal entity domiciled abroad, when it and the company domiciled in Brazil are under common corporate or administrative control or when at least ten percent of the capital stock of each one belongs to the same individual or legal entity;
f)       a natural or juridical person, resident or domiciled abroad, who, jointly with the legal entity domiciled in Brazil, holds a shareholding in the capital of a third legal entity, the sum of which is characterized as controlling companies or affiliates thereof, in the form Defined in §§ 1 and 2 of art. 243 of Law 6404 of December 15, 1976;
g)      the individual or legal entity, resident or domiciled abroad, that is its associate, in the form of a consortium or condominium, as defined in Brazilian law, in any enterprise;
h)      a natural person residing abroad who is related to or related to the third degree, spouse or companion of any of its directors or of its partner or controlling shareholder in direct or indirect participation;
i)       the individual or legal entity, resident or domiciled abroad, that enjoys exclusivity, as its agent, distributor or concessionaire, for the purchase and sale of goods, services or rights;
j)       an individual or legal entity, resident or domiciled abroad, in which the legal entity domiciled in Brazil enjoys exclusivity, as agent, distributor or concessionaire, for the purchase and sale of goods, services or rights

With the measure, the legislator intends to ensure, in particular, that transactions between legal entities belonging to the same economic group are similar to those practiced in the domestic market, avoiding irregular remittances abroad or irregular collection or deduction of income tax.