The Governments of Brazil and Switzerland have signed the Convention for Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (DTT). In line with Brazil’s commitments under the G20, the DTT, signed on May 3, 2018, incorporates certain minimum standards of the Organization for Economic Cooperation and Development (OECD) Project on Tax Erosion and Transfer of Profits (BEPS Project). It also includes an anti-abuse clause as well as an administrative assistance clause in accordance with the current international standard for exchange of information. Continue Reading
Puerto Rico’s Dealers Act: what every principal should know before selling products or services in Puerto Rico
By Nikos Buxeda and Camille Álvarez
Puerto Rico’s Act 75 of June 24, 1964 was enacted to protect Puerto Rican distributors or dealers from arbitrary terminations to a distribution agreement. It essentially provides that, regardless of any contractual provision to the contrary, a dealer or distribution agreement may not be terminated, impaired or not renewed by the principal, unless there is “just cause” (as defined in Act 75) for such termination.
Moreover, if the distribution agreement is terminated without “just cause,” the principal is liable for damages pursuant to a statutory formula that includes five years of profits and the goodwill of the distributor.
As a result, distribution agreements in Puerto Rico are evergreen. In addition, the distributor can allege constructive termination (impairment) if it believes the principal is treating it unfairly and seek damages.
Act 75 provides Puerto Rican distributors with powerful protections and has been the source of substantial litigation over the years.
Find out more about the implications of Act 75.
EU/Mexico trade deal to promote foreign investment
By: Andrea Lapunzina Veronelli and Ben Sanderson
On 21 April 2018, the European Union and Mexico reached a deal on a novel trade agreement the “EU-Mexico FTA”. While the agreement keeps with its traditional role by removing remaining customs duties and reducing formalities for trade, the EU-Mexico FTA incorporates innovative elements, such as binding commitments to protect workers’ right and the environment, with an express reference to the Paris Agreement.
Read more here.
TAX ALERT – INFORMATION ABOUT TAX BENEFITS – SEFAZ/RJ
Rio de Janeiro State Resolution n° 231, from March 23, 2018, establishes certain obligations for taxpayers who enjoy tax benefits for the provision of data to the National Tax Transparency website (CONFAZ), in which shall be publicized all the information and legislation regarding tax benefits.
The deadline to present all the data required is April 30, 2018.
Taxpayers benefiting from tax benefits granted by the State of Rio de Janeiro, such as exemptions, incentives and tax or financial or fiscal benefits related to ICMS (a sort of State VAT in Brazil)shall provide all the required data , per legislation publicized until August 8, 2017.
All the data and information required shall be presented in compliance with the spreadsheets attached to Resolution n° 231/2018. The first spreadsheet must be completed with information regarding each taxpayer facility in the State of Rio de Janeiro and the corresponding legislation that granted the incentives and fiscal or financial benefits related to ICMS.
The second spreadsheet must contain detailed information regarding the incentives and fiscal or financial benefits related to ICMS granted to each facility.
Taxpayers who fail to comply with Resolution n° 231/2018 will have their incentives and fiscal or financial benefits related to ICMS cancelled by the State of Rio de Janeiro.
We are at your entire disposal to clarify any doubts you may have.
____________________________________________________________________________________________
ALERTA TRIBUTÁRIO – INFORMAÇÕES SOBRE BENEFÍCIOS FISCAIS – SEFAZ/RJ
A Resolução SEFAZ nº 231, de 23 de março de 2018, estabeleceu algumas obrigações para os contribuintes fluminenses que usufruem de benefícios fiscais para o fornecimento de dados ao Portal Nacional da Transparência Tributária, disponibilizado no sítio eletrônico do CONFAZ, onde devem ser publicadas as informações e a documentação comprobatória dos atos normativos e dos atos concessivos relativos aos benefícios fiscais.
O prazo para prestar as informações expira no dia 30 de abril.
Devem prestar informações os contribuintes que usufruem de benefícios fiscais concedidos pelo Estado do Rio de Janeiro, considerados como isenções, incentivos e benefícios fiscais ou financeiro-fiscais relativos ao ICMS, que tenham sido instituídos por atos publicados até 8 de agosto de 2017.
As informações devem ser preenchidas de acordo com as planilhas anexas a Resolução SEFAZ nº 231/2018, sendo que a primeira planilha contém informações relativas a cada estabelecimento do contribuinte beneficiário e aos atos concessivos originais de cada estabelecimento e suas alterações, e os correspondentes atos normativos nos quais os atos concessivos se basearam.
Na segunda planilha devem ser apresentadas informações relativas a cada estabelecimento do contribuinte beneficiário com o respectivo registro do benefício ou incentivo concedido e a natureza do benefício concedido (o que inclui dilação do prazo de pagamento, isenção, redução de base de cálculo, manutenção de crédito, crédito outorgado ou presumido, dedução do imposto apurado, crédito para pagamento, remissão, anistia, moratória, transação etc.).
Os contribuintes que não cumprirem o disposto na Resolução SEFAZ nº 231/2018 perderão os benefícios fiscais concedidos pelo Estado do Rio de Janeiro nos termos da Lei Complementar nº 160/2017.
No caso de dúvidas, por favor, não hesitem em nos contatar.
informativotributario@cmalaw.com
Co-working: the collaborative economy and the Brazilian real estate market
By Rafael Jordão Bussière
Partner, Campos Mello Advogados in Cooperation with DLA Piper
A long-term effect of the 2008 financial crisis is that markets have innovated to focus more on sustainability, cost mitigation and collaborative business structures.
In this changing world, asset-sharing was a natural development for the real estate business.
Complex collaborative work spaces remedy an array of vacancy problems, such as empty desks, underused meeting rooms and substantial maintenance costs. In addition, co-working spaces with aggregated ancillary service packages help smaller companies and freelancers to focus on their main business activities, while scaling up the administrative office services they are able to enjoy. Such spaces also create an environment of business development and cooperation among users.
The first shared workspace appeared in New York during the 90s; collaborative spaces quickly became a here-to-stay trend. An independent survey[1] indicates that, as of December 2017, 18,900 co-working spaces, with an average of 130 members per workspace. were operating worldwide. While the shared co-working market is still largely dominated by specialized companies[2], it is now engaging traditional real estate players.[3]
In Brazil, co-working represents a disruption to the customary use of real estate property. Currently, there are over 1,000 co-working generating more than 5,000 direct jobs and over 1 million indirect jobs[4] in Brazilian territory. These numbers evidence the importance of such activity in our challenging market.
In Brazil, shared office services with tailored short-term contracts have benefited individuals, startups, small companies and even incubator affiliates of larger corporations. As this trend grows, one consequence being observed in Brazil is that long-term engagements (eg, lease agreements) are being replaced by flexible legal ties.
The current challenge in Brazil is to define the legal framework applicable to such collaborative work spaces, which combine concepts of short-term commercial lease with service rendering − a hybrid form of contract that so far is pending any supporting legal framework.
A federal collaborative workspace bill, # 8.300/2017, now moving through the House of Representatives,[5] aims to oversee such co-working activity.
The bill has not yet undergone formal review and rewording, but in its current form, it would set out that a manager of a co-working spaces is a service renderer and not a lessor.
The existence of this bill is a sign that Brazilian law is considering the co-working industry in much the same way that it regards the hospitality sector: that is, such business activity is mainly a service rather than a lease relationship. One consequence of this approach is an impact on taxation.
With regard to tax levying and related fiscal duties repercussions, it is important to highlight that service providers in Brazil are subject to a municipal service tax.
In addition, a recent São Paulo Municipality Law 16.757/2017, intending to tighten the tax control on emerging business, established that co-working providers are deemed jointly and severally liable for the payment of services tax with regards to the users of shared spaces that are not duly registered with the São Paulo municipal authority.[6]
The latter law generated significant opposition considering that the co-working service providers would assume a supervisory role with regard to the respective user as well as a potential liability before the tax authorities.[7] The debate around taxation of the co-working industry is ongoing.
On the other hand, it is interesting to note that the interpretation stated in bill 8.300/2017 − which treats co-working as a service − also aligns the co-working providers’ interests: the Brazilian Lease Law, 8.245/1991, is quite protective to lessees.
In a high-level analysis of the Lease Law, while lessees usually are allowed to terminate a lease without cause during the lease term −- as long as a non-substantial penalty is paid − termination by a lessor requires specific conditions, such as (a) a contractual breach by the lessee; (b) lack of guarantee; (c) government determination of urgent need for works; or (d) specific circumstances, in the case of a sale of the real estate asset.
There are also certain conditions in which a lessee has the right to require the automatic renewal of the commercial lease in order to protect the goodwill of the business.
Therefore, the categorization of co-working as a service in the bill is interesting, from both the tax control and property management perspectives; but − again − this bill is not yet formally a law.
While the formal approval of other laws is pending, the definition of the co-working legal structure depends on the contract structure and the normative documents covering the use of the facilities and the interrelationship of the users.
Considering the lack of legislation on the matter, prudent businesses operating in Brazil are seeking to ensure that relevant contracts are well designed, including a detailed scope of services (if any) and use conditions, to help ensure that multi-users may operate in appropriate work conditions and to avoid disputes concerning each user’s licensing, labor and tax regimes.
It is widely understood in Brazil that because the concept of co-working itself is constantly expanding, the need for further directives is growing.
Meanwhile, co-living projects in Brazil are taking baby steps. A project in São Paulo is integrating collaborative co-working spaces and temporary residences, mostly for freelancers and startup entrepreneurs willing to have an establishment and network in the Brazilian financial capital.[8]
Although the collaborative economy is a reality in Brazil, discussions about its impact and effects will not cease as long as the relevant tax treatment and legal framework remain uncertain.
[1] 2018 Global Coworking Survey, Article By Carsten Foertsch referring to 2018 Global Coworking Survey supported by Nexudus, Essensys & WUN Systems – Access on 03/26/18 http://www.deskmag.com/en/1-7-million-members-will-work-in-coworking-spaces-by-the-end-of-2018-survey
[2] 5 Minute Guide: The Impact of Coworking Spaces on Real Estate, by Profimex. Access on 03/26/18 https://www.profimex.com/wp-content/uploads/2017/08/5MinuteGuide-TheImpactofCoworkingSpacesonRealEstateFV.pdf
[3] As an example, the French hospitality group AccorHotels has recently entered into an association with NextDoor, the co-working branch of Bouygues Immobilier. Access on 03/26/18 https://www.lopinion.fr/edition/economie/geants-l-immobilier-se-mettent-coworking-133291
[4] As per the rational for the Deputy bill # 8.300/2017 and research by the national co-working association ANCEV – Associação Nacional dos Coworkings e Escritórios Virtuais. Access on 03/26/18 http://www.camara.gov.br/proposicoesWeb/fichadetramitacao?idProposicao=2147960
[5] Deputy bill # 8.300/2017 – Access on 03/25/2018 http://www.camara.gov.br/proposicoesWeb/fichadetramitacao?idProposicao=2147960
[6] Access on 03/26/2018 http://www.ibet.com.br/wp-content/uploads/2017/11/LEI-16757.2017.pdf
[7] Access on 03/26/2018 http://www.coad.com.br/home/noticias-detalhe/84422/coworking-e-iss-a-economia-compartilhada-na-mira-do-municipio-de-sp
[8]See http://www.startupsstars.com/2015/05/co-living-em-sao-paulo-uma-nova-experiencia-empreendedora/ Access on 03/26/18.
Private equity and hedge funds in Puerto Rico – a welcoming environment in the Caribbean
Written by: Nikos Buxeda, Manuel López-Zambrana, Camille Alvarez and Juan Carlos Feliciano
Ten years ago, private equity funds and hedge funds were practically nonexistent in Puerto Rico. This has changed dramatically as the result of two main developments: the enactment of Act 185-2014, known as the Private Equity Funds Act and (ii) the influx of financial industry professionals moving to the island to take advantage of the tax benefits available under Acts 20 and 22 (for a more detailed discussion of those benefits, please see Puerto Rico’s Act 20 and Act 22 – key tax benefits).
Find out more here.
TRF-2 MAINTAINS THE VALIDITY OF “TROPA DE ELITE” TRADEMARK REGISTRATION, FINDING THE SONG AND THE MOVIES CANNOT BE CONFUSED
The Federal Court of Appeals of the 2nd Region (TRF-2) has ruled that the song “Tropa de Elite,” owned by the Brazilian band Tihuana, is not a sufficient cause for the cancellation of the “Tropa de Elite” trademark registrations related to the Tropa de Elite movies, because the band allowed the use of the song in the movies as well as in the movies’ titles.
The lawsuit was brought by the band Tihuana against the director of the Tropa de Elite movies, José Padilha, and his production company. The band requested the nullity of the trademarks “Tropa de Elite,” registered before the INPI and owned by the defendants, on the grounds that the registrations would violate article 124, XVII of the Industrial Property Law (LPI), which prohibits the use of trademarks in artistic works that are likely to cause confusion or association, except with the consent of the author.
The film director argued, in its response, that there is no risk of confusion between the movies and the song, since the public associates the expression “Tropa de Elite” with the movies and the song only became widely known after the release of the first movie.
The court decision upheld the verdict of the lower court and emphasized the fact that the release of the song “Tropa de Elite” before the movies opened is not crucial to the resolution of the dispute; not only had Tihuana authorized the use of the song name in the movie titles, but the band also agreed to change excerpts of the song so that it would better fit the narrative of the first movie.
Judge Messod Azulay stated that the “Tropa de Elite” trademarks related to the movie sequel cannot be confused in any way with the song owned by the group Tihuana, considering that it was the success of the movie which gave fame to the expression and, as a result, gave the expression a new connotation.
The judge also stressed that the trademarks are strengthened by the way the same expression is used in the movies, eliminating the possibility of confusion by the public.
TRF-2 MANTÉM REGISTRO DAS MARCAS “TROPA DE ELITE” POR ENTENDER QUE MÚSICA E FILMES SÃO NÃO SE CONFUNDEM
A Segunda Turma do Tribunal Regional Federal da 2ª Região (TRF-2) decidiu que a música intitulada “Tropa de Elite”, de autoria da banda Tihuana, não é causa suficiente para anular os registros das marcas “Tropa de Elite”, referentes aos filmes, tendo em vista que a banda permitiu a utilização da música nos filmes e, inclusive, que seu título desse nome a eles.
Trata-se de controvérsia originada pela banda Tihuana contra o diretor dos filmes “Tropa de Elite”, José Padilha, e sua produtora. A banda requeria a anulação das marcas “Tropa de Elite”, registradas perante o INPI e de titularidade dos réus, sob a alegação de que os registros violariam o artigo 124, XVII da Lei de Propriedade Industrial (“LPI”), que proíbe uso de marca em obra artística suscetível de causar confusão ou associação, salvo com consentimento do autor.
O diretor, em resposta, alegou que não há risco de confusão dos filmes com a canção, tendo em vista que a expressão “Tropa de Elite” é associada pelo público aos filmes, e que a música apenas se tornou amplamente conhecida após o lançamento do primeiro filme.
O acórdão manteve a decisão de 1ª instância e destacou que o fato da música “Tropa de Elite” ter sido lançada antes do filme, de mesmo nome, não é fundamental para a resolução da lide, tendo em vista que não só a banda Tihuana autorizou a utilização do nome da canção no título da obra cinematográfica, como ainda concordou em alterar trechos da letra para que ela melhor se adequasse à narrativa do primeiro filme.
O relator, Messod Azulay, afirmou que as marcas “Tropa de Elite”, referentes à sequência de filmes, não se confundem de forma alguma à música da banda Tihuana, tendo em vista que o sucesso do filme deu tanta fama à expressão, que fez com que ela passasse a ser associada diretamente ao filme e adquirisse nova conotação.
O ministro também destacou o fato de as marcas serem compostas pela mesma grafia e arte do sinal veiculado nas obras cinematográficas, de forma que elimina a possibilidade de confusão pelo público.
Em caso de dúvidas sobre o assunto acima, por favor, não hesitem em nos contatar.
Paula Mena Barreto
Campos Mello Advogados in Cooperation with DLA Piper
Sócia/Partner
T: +55 21 3262-3028paula.menabarreto@cmalaw.com
Investment Protection in Latin America: Mexico Takes One Step Forward, Venezuela Takes Two Steps Back
Mexico has signed the Convention on the Settlement of Investment Disputes between States and National of other States, better known as the Washington Convention or theICSID Convention. This important development is expected to make Mexico considerably more attractive for foreign investors.
In contrast, the Venezuela National Constitutional Assembly, which was formed in mid-2017 – many say unconstitutionally and illegally – recently approved new restrictions on foreign investment.
The existence of neutral dispute resolution mechanisms between a foreign investor and a host state is an important condition in any international investment project. A prudent foreign investor exploring a possible investment always starts by confirming that a state adheres to certain multilateral investment treaties. The stark contrast between Mexico and Venezuela offers an interesting perspective for those seeking to invest in Latin America.
For more information please contact:
Cecilia Azar
Partner, Mexico City
Christina P. Maccio
Partner, Houston
Marlon Meza
Foreign Legal Consultant, Houston
Harout Jack Samra
Associate, Miami
Mexico’s General Law on Administrative Responsibilities: Preventing and Fighting Corruption
In 2015, Mexico embarked on sweeping constitutional reforms that created the National Anticorruption System, empowering competent authorities at all governmental levels to prevent and fight corruption.
As part of these reforms, in July 2016, several key pieces of legislation were amended and four new laws were enacted – among them the General Law on the National Anticorruption System (GLAR).
This article focuses on the applicability and scope of GLAR, which entered into force in July 2017. We will answer the following questions: (i) may legal entities be held liable? (ii) what types of fines may be imposed? and (iii) are there any mitigating factors?
MAY LEGAL ENTITIES BE HELD LIABLE?
Under GLAR, all kinds of companies doing business in Mexico can be held liable for acts committed by their employees, managers, directors or other persons acting to obtain an improper benefit on behalf of the legal entity, if the acts constitute so-called “serious administrative offenses.” Foreign companies may be also on the hook when doing business in Mexico and when having contact with Mexican public officials.
The following offenses are considered to be “serious administrative offenses” in which a private entity may be considered to be involved:
- Bribery
- Unlawful participation in administrative proceedings when entity is excluded from public procurement
- Influence peddling
- Use of false information
- Embezzlement
- Improper hiring
- Collusion
- Obstruction of investigation
WHAT TYPES OF FINES MAY BE IMPOSED?
The kind of liability GLAR establishes towards legal entities is administrative liability. The administrative sanctions and administrative procedures provided under the GLAR are independent from the criminal sanctions and criminal procedures that may be applicable under Mexican Criminal legislation.
The administrative sanctions that may be imposed over companies under GLAR are the following:
- Fine of up to twice the benefit obtained, or up to approximately US$6.466 million
- Disbarment from public procurement for up to ten years
- Suspension of activities for up to three years
- Forced corporate dissolution
- Indemnity for damages caused to the public Treasury
In order for the sanctions related to suspension of activities or forced dissolution to be imposed, two elements must be met:
- (i) the private entity must have obtained an economic benefit and
- (ii) it has to be proven that the partners/shareholders, management or surveillance departments of the private entity were involved in the performance of the corrupt practice, or that the private entity has been systematically used to commit corrupt activities.
ARE THERE ANY MITIGATING FACTORS?
GLAR provides the option for legal entities to mitigate liability. These are the factors taken into consideration for mitigating liability:
- Voluntary disclosure
- Cooperation with authority
- Adoption of compliance programs
- Adoption of mitigation measures
For more information please contact:
Eduardo J. Gallastegui Armella
Managing Partner, Mexico City
Eduardo.gallastegui@dlapiper.com
T +52 55 5261 1807
Maria Eugenia Rios
Partner
maria.rios@dlapiper.com
T +52 55 5261 1800
Paola Aldrete
Associate
paola.aldrete@dlapiper.com
T +1 212.335.4549
Tax advantages of Uruguayan holding companies
The following is a guest post by Guzman Ramírez from Bergstein Abogados, an independent law firm in Uruguay.
Uruguay offers a number of tax advantages to multinationals. This has become especially so in the wake of the substantial tax reforms which have taken place in Uruguay in the last few years, under which Uruguay has been excluded from OECD blacklists.
In Uruguay, corporations can be used to engage in offshore holding activities. This is what is known as sociedades de inversion or “holding companies”, ie, companies expressly contemplated under Uruguay’s Companies Act whose main purpose is to participate in the capital of other companies.
Such holding companies are able to set up legal structures in Uruguay with taxation that is very low − indeed, practically zero. This is so because, for tax purposes, Uruguay maintains the so-called principle of the source (principio de la fuente): companies only pay corporate income tax (Impuesto a las Rentas de las Actividades Económicas − IRAE) on locally sourced income; foreign-sourced income is excluded from corporate income tax. Furthermore, the net worth tax (Impuesto al Patrimonio − IPAT), which taxes assets at a rate of 1.5 percent, and VAT (22 percent) are only levied on assets and investments located inside Uruguayan territory.
Therefore, insofar as a holding company does not conduct any activities in Uruguay, no local taxation applies, except for a fixed annual payment of approximately US$600, called the Corporations Control Tax (Impuesto de Control de las Sociedades Anónimas − ICOSA).
—As a result, income obtained from the sale of participation in foreign companies or businesses, dividends obtained from foreign entities in whose capital the Uruguayan holding company participates, assets allocated in the liquidation proceedings of a foreign company and interest collected from individuals or companies abroad are all deemed to be foreign income, excluded from taxation in Uruguay.
In addition, where there is no locally sourced income, then remittance of dividends remains tax free. In Uruguay, remittance of dividends is only taxed where the following conditions are cumulatively met: the company based in Uruguay is subject to corporate income tax in Uruguay; and dividends effectively derive from income subject to corporate income tax. In consequence, shareholders of holding companies based in Uruguay are not subject to personal income tax (Impuesto a la Renta de las Personas Físicas − IRPF).
Guzmán Ramírez
Tax Department
Bergstein Abogados
Montevideo, Uruguay
