The Book of Laughter and Forgetting

The Book of Laughter and Forgetting is a novel by author Milan Kundera, who also wrote The Unbearable Lightness of Being. Published in 1979, The Book of Laughter and Forgetting contains seven separate narratives that share common themes such as a memory, forgetting and political history.

The Special Program of tax regularization option for the Simples Nacional tax regime grants discounts and special conditions of payment

On 04.09.2018, Supplementary Law No. 162/2018 was published, which established the Special Program of Tax Regularization of Micro-Business and Small Business opting for the Simples Nacional tax regime”PERT-SN”).
In order to join PERT-SN, the taxpayer must pay 5% of the debt in up to five consecutive monthly installments. The remaining balance can be paidi) in cash with discounts of 90% of interest and 70% of penalties;ii) up to 145 monthly installments, with discounts of 80% of interest and 50% of penalties; oriii) in up to 175 monthly installments, with discounts of 50% of interest and 25% of the penalties.
In all cases, PERT-SN grants a 100% discount of legal charges, including attorney’s fee.
Debits of the Simples Nacional past due until November 2017 may be included in the PERT-SN whether or not enrolled as overdue tax liabilities.
The adhesion to the PERT must be formalized within 90 days counted from the publication of the Supplementary Law nº 160/2018, i.e. July 9th, 2018 .
Candido Martins Advogados is available for clarification.

Management of Brazilian companies convicted by Brazilian Securities and Exchange Commission for breach of fiduciary duties

The Brazilian Securities and Exchange Commission”CVM“) has recently convicted officers, members of the board of directors and members of the fiscal council of two Brazilian companies for breach of their fiduciary duties, especially the duty of diligence and the duty to inform, and imposed R$2,000,000.00 in fines.
In one of the casesCVM Administrative Proceeding No. RJ2014/7072), officers were held liable for preparing financial statements with accounting inconsistencies and the members of the board of directors were held liable for approving such financial statements without taking any measures to remedy such irregularities.   In another caseCVM Administrative Proceeding No. RJ2013/9266) a member of the board of directors of the company was held liable for not objecting to the approval of a capital reduction conducted in clear violation of the Brazilian Corporate Law and in detriment of the minority shareholders of the company.
In both cases, CVM denied the plea agreements proposed by the managers of the companies, which suggested the payment of fines in an amount close to 10%ten percent) of the total amount of fines actually imposed by CVM in such convictions.
These examples show that CVM is punishing managers’ lack of action in the face of possible accounting and corporate irregularities and in breach of their fiduciary duties imposed by the Brazilian Corporate Law.
The above-mentioned cases involve complex accounting and corporate issues. Specially in complex transactions, it is fundamental that managers seek advice from specialists to better understand the implications to the company, its shareholders or even to third parties and make decisions based on their fiduciary duties.
Candido Martins Advogados is available for clarification.

The concept of inputs for  utilization of PIS and COFINS credits

Recently, the Superior Court of Justice”STJ”) concluded the discussion regarding the concept of inputs for the calculation of PIS/COFINS credits, by judging the Special Appeal No. 1,221,170/PR, under the rite of repetitive appeals.
The STJ decided that the concept of input should be assessed considering the criteria of “essentiality” or “relevance”, considering the indispensability or importance of a certain item, good or service for the development of the economic activity carried out by the taxpayer. As the trial was conducted under the rite of repetitive appeals, the STJ’s understanding must be observed by all lower courts in Brazil.
The concept of inputs regarding offset of PIS/COFINS credits in the non-cumulative regime has generated a lot of discussions. The legislation regarding these contributions has not explicitly defined such concept, giving rise to different interpretations.
In view of the lack of legislation on the subject, the Brazilian Federal Revenue OfficeReceita Federal do Brasil – “RFB”) issued Normative Instructions No. 247/2002 and No. 404/2004, establishing the definition of inputs for the calculation of PIS/COFINS credits.
These normative instructions replicated to the PIS / COFINS the concept of inputs provided by IPI legislation, according to which raw materials, intermediate products and packaging materials are considered inputs. This definition is mainly focused on the production and marketing of goods.
The contributions to PIS/COFINS is calculated based on the total taxable income of the taxpayers, which operate in a variety of industries. Thus, the applicability of the definition of inputs prescribed for in the IPI legislation to the PIS/COFINS may not be the most appropriate one, since these taxes have different calculation bases and tax incidence hypothesis.
In this context, some taxpayers claimed that the concept of input should be  the same used for deductible expenses for IRPJ calculation purposes. If this was the case, all the recurrent expenses of the taxpayer, which are necessary for the exploration of the economic activity, would be considered inputs.
Over the last few years, the Administrative Council of Tax Appeals”CARF”) consolidated its own understanding, based on an intermediate doctrinal line between the concepts adopted for IPI and for IRPJ. CARF jurisprudence adopts the criteria of essentiality and indispensability of the expense or cost as requirements for the calculation of PIS / COFINS credits.
The STJ’s recent ruling followed the current case law of CARF on the subject, choosing “essentiality” and “indispensability” as requirements for the characterization of inputs in the non-cumulative PIS / COFINS system.
However, the essentiality of a given expense / cost must be analyzed on a case-by-case basis and it can be subjective and difficult to prove. For this reason, even after the judgment of the repetitive appeal by the STJ, the taxpayers still have doubts to classify their expenses or costs as inputs for the purpose of PIS/COFINS.
Therefore, it is fundamental that the taxpayers seek legal advice to help them identifying which inputs are essential and/or relevant to their economic activities and can generate PIS / COFINS credits.
Candido Martins Advogados is available for any clarification.