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Answer to Advance Tax Ruling Request no. 62/2017 - Taxation over Reinsurance Operations

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1/27/2017 12:00 AM Demarest News

Answer to Advance Tax Ruling Request no. 62/2017 - Taxation over Reinsurance Operations

The taxation in the reinsurance market in Brazil must comply with the provisions of the Answer to Advance Tax Ruling Request no. 62/2017, recently published in the Federal Gazette on 01/26/2017, and elaborated by the Global Taxation Bureau (Coordenação-Geral de Tributação da Receita Federal - "COSIT") of the Federal Revenue ("RFB").

The reinsurance companies awaited the RFB's positioning since the enactment of Supplementary Law No. 126/2007, which extinguished the monopoly on the exploitation of reinsurance activities by the IRF (former Brazilian Reinsurance Institute - Instituto de Resseguros do Brasil), and allowed other national and international corporations to carry out such activities.

The Answer to Advance Tax Ruling Request no. 62/2017 confirms the positioning already adopted by the RFB regarding the taxation of (i) Brazilian reinsurance companies ("local reinsurance companies"); (ii) foreign reinsurance companies, registered by SUSEP and holding a representation office in Brazil ("admitted reinsurance companies"); and (iii) foreign reinsurance companies, with main office abroad and no representation office in Brazil ("eventual insurance companies").

We emphasize the importance and comprehensiveness of this understanding of the RFB about the reinsurance market. The Answer to Advance Tax Ruling Request published by the COSIT are binding to all tax administration agencies, and may be used by other taxpayers found in similar situation, even if they did not submit the advance tax ruling request.

In that sense, the corporations that explore reinsurance activities shall adapt the taxation levied upon their operations, in accordance with the understanding published by the RFB in the Answer to Advance Tax Ruling Request no. 62/2017.

Below follows the transcription of the digest of the Answer to Advance Tax Ruling Request no. 62/2017. Our taxation and insurance team are at your disposal to clarify any doubts regarding this theme.

 

"SUBJECT: CORPORATE INCOME TAX - (IMPOSTO DE RENDA DAS PESSOAS JURÍDICAS - IRPJ)

ABSTRACT: REINSURANCE OPERATIONS. LOCAL AND ADMITTED REINSURANCE COMPANIES. TAX TREATMENT.

The "local reinsurance companies" and the "admitted reinsurance companies" are subject to the Corporate Income Tax, calculated according to the actual profit regime.

LEGAL PROVISIONS: Supplementary Law No. 126, of January 15, 2007, Art. 4; Decree-Law No. 73, of November 21, 1966, Art. 4; Act No. 9.718, of December 27, 1998, Art. 3, § 5 and § 6, item II, and Art. 14, item II; Decree No. 3.000, of March 26, 1999, Art. 146, item I, and Art. 147, item I and II; CNSP Resolution No. 330, of December 9, 2015, Attachment I, Art. 11, 12, 13 and 15; Susep Memo No. 359, of January 31, 2008, Art. 3.

 

SUBJECT: SOCIAL CONTRIBUTION on THE NET PROFITS (CONTRIBUIÇÃO SOCIAL SOBRE O LUCRO LÍQUIDO - CSLL)

ABSTRACT: REINSURANCE OPERATIONS. LOCAL AND ADMITTED REINSURANCE COMPANIES. TAX TREATMENT.

The "local reinsurance companies" and the "admitted reinsurance companies" are subject to the Social Contribution on the Net Profits applicable to the private insurance companies.

LEGAL PROVISIONS: Supplementary Law No. 126, of January 15, 2007, Art. 4; Decree-Law No. 73, of November 21, 1966, Art. 4; Act No. 9.718, of December 27, 1998, Art. 3, § 5 and § 6, item II, and Art. 14, item II; Act No. 7.689, of December 15, 1988, Art. 3; Act No. 13.169, of 6 October, 2015, Art. 1; CNSP Resolution No. 330, of December 9, 2015, Attachment I, Art. 11, 12, 13 and 15; Susep Memo No. 359, of January 31, 2008, Art. 3.

 

SUBJECT: PIS/PASEP CONTRIBUTION

ABSTRACT: REINSURANCE OPERATIONS. LOCAL AND ADMITTED REINSURANCE COMPANIES. TAX TREATMENT.

The "local reinsurance companies" and the "admitted reinsurance companies" are excluded from the non-cumulative accrual rules of the PIS/Pasep Contribution. The revenues accrued in reinsurance service provision operations to assignors that are resident or domiciled in the national territory are subject to the incidence of the PIS/Pasep Contribution at a rate of sixty-five hundredths percent (0.65%). The revenues accrued in the reinsurance service provision operations to assignors that are resident or domiciled abroad, if so allowed by the specific legislation, are exempt, being the following provisions applicable: i) when the payment for the service represents foreign capital inflow, the rules set forth in §1 and item III of Art. 14 of Provisional Executive Order No. 2.158-35/2001; and ii) when there is no foreign capital inflow, the rules set forth in Act No. 11.371/2006.

LEGAL PROVISIONS: Supplementary Law No. 126, of January 15, 2007, Art. 4; Decree-Law No. 73, of November 21, 1966, Art. 4; Act No. 9.718, of December 27, 1998, Art. 3, § 5 and § 6, item II, and Art. 14, item II; Act No. 10.637, of December 30, 2002, article 8, item I; CNSP Resolution No. 330, of December 9, 2015, Attachment I, Art. 11, 12, 13 and 15; Susep Memo No. 359, of January 31, 2008, Art. 3; Provisional Executive Order No. 2.158-35, of August 24, 2001, Art. 14, item III, and § 1; Act No. 10.637, of December 30, 2002, Art. 3 and Art. 5, item II; Act No. 11.371, of November 28, 2006.

 

SUBJECT: SOCIAL SECURITY CONTRIBUTION (CONTRIBUIÇÃO SOCIAL PARA A SEGURIDADE SOCIAL - COFINS

ABSTRACT: REINSURANCE OPERATIONS. LOCAL AND ADMITTED REINSURANCE COMPANIES. TAX TREATMENT.

The "local reinsurance companies" and the "admitted reinsurance companies" are excluded from the non-cumulative accrual ruling of the COFINS contribution. The revenues accrued in reinsurance service provision operations to assignors that are resident or domiciled in the national territory are subject to the incidence of the COFINS contribution at a tax bracket of four percent (4%). The revenues accrued in the reinsurance service provision operations to assignors that are resident or domiciled abroad, if so allowed by the specific legislation, are exempt, being the following provisions applicable: i) when the payment for the service represents foreign capital inflow, the rules set forth in § 1 and item III of Art. 14 of Provisional Executive Order No. 2.158-35/2001; and ii) when there is no foreign capital inflow, the rules set forth in Act No. 11.371/2006.

LEGAL PROVISIONS: Supplementary Law No. 126, of January 15, 2007, Art. 4; Decree-Law No. 73, of November 21, 1966, Art. 4; Act No. 9.718, of December 27, 1998, Art. 3, § 5 and § 6, item II, and Art. 14, item II; CNSP Resolution No. 330, of December 9, 2015, Attachment I, Art. 11, 12, 13 and 15; Susep Memo No. 359, of January 31, 2008, Art. 3; Provisional Executive Order No. 2.158-35, of August 24, 2001, Art. 14, item III; Act No. 10.833, of December 29, 2003, Art. 3 and Art. 6, item II; Act No. 11.371, of November 28, 2006.

 

SUBJECT: WITHHOLDING INCOME TAX (IMPOSTO SOBRE A RENDA RETIDO NA FONTE - IRRF

ABSTRACT: REINSURANCE OPERATIONS. EVENTUAL INSURANCE COMPANIES. SERVICE PROVISION. TAX TREATMENT.

The incom arising from of "eventual insurance company" operations, when paid, credited, delivered, employed or submitted abroad, are subject to withholding income tax (IRRF), at a rate of twenty-five percent (25%), considering that the reinsurance company provides services in its activities.

LEGAL PROVISIONS: Supplementary Law No. 126, of January 15, 2007, Art. 4; Decree-Law No. 73, of November 21, 1966, Art. 4; Act No. 9.718, of December 27, 1998, Art. 3, § 5 and § 6, item II, and Art. 14, item II; CNSP Resolution No. 330, of December 9, 2015, Attachment I, Art. 11, 12, 13 and 15; Susep Memo No. 359, of January 31, 2008, Art. 3; Act No. 9.779, of January 19, 1999, Art. 7; Provisional Executive Order No. 2.158-35, of August 24, 2001, Art. 26; item 5 of the Attachment over Financial Services under the General Agreement on Trade in Services (GATS), executed during the Uruguay Round of the GATT (1994), and enacted by Decree No. 1.355, of December 30, 1994.

 

SUBJECT: ADMINISTRATIVE TAXATION PROCESS

ABSTRACT: REINSURANCE OPERATIONS THAT REQUIRE THE INTERPRETATION OF INTERNATIONAL TREATIES TO PREVENT DOUBLE TAXATION.

The Advance Tax Ruling Request is ineffective as the applicable tax law provisions were not identified, namely, the specific article and treaty to prevent double taxation, as well as the facts the Advance Tax Ruling Request interpretation shall apply to.

LEGAL PROVISIONS: Normative Ruling RFB No. 1.396, of September 16, 2013, item IV, § 2, Art. 3

 

SUBJECT: PIS/PASEP-IMPORTS PROGRAM CONTRIBUTION

ABSTRACT: REINSURANCE OPERATIONS. IMPORTED SERVICE. TAX TREATMENT.

The import of reinsurance services by an assignor that is resident or domiciled in Brazil are taxable events of the PIS/Pasep Contribution-Imports, calculated at a rate of one and sixty-five hundredths percent (1.65%) over the assessable basis mentioned in § 1 of Art. 7 of Act No. 10.865/2004, per text of Act No. 12.249/2010. The taxpayer is the assignor who requires the reinsurance services from the "eventual insurance company".

LEGAL PROVISIONS: Supplementary Law No. 126, of January 15, 2007, Art. 4; Decree-Law No. 73, of November 21, 1966, Art. 4; Act No. 9.718, of December 27, 1998, Art. 3, § 5 and § 6, item II, and Art. 14, item II; CNSP Resolution No. 330, of December 9, 2015, Attachment I, Art. 11, 12, 13 and 15; Susep Memo No. 359, of January 31, 2008, Art. 3; Act No. 10.865, of April 30, 2004, Art. 7, § 1, per text of Act No. 12.249, of June 11, 2010 and Art. 8, item I and II.

 

SUBJECT: SOCIAL SECURITY FUNDING CONTRIBUTION INCIDENT OVER IMPORTED COMMODITIES AND SERVICES (CONTRIBUIÇÃO PARA O FINANCIAMENTO DA SEGURIDADE SOCIAL INCIDENTE SOBRE A IMPORTAÇÃO DE BENS E SERVIÇOS - COFINS-IMPORTAÇÃO)

ABSTRACT: REINSURANCE OPERATIONS. IMPORTED SERVICE. TAX TREATMENT.

The import of reinsurance services by an assignor resident or domiciled in Brazil is a taxable event of the COFINS-Imports, calculated at a rate of seven and six tenths percent (7.6%) over the assessable basis set forth in § 1 of Art. 7 of Act No. 10.865/2004, per text of Act No. 12.249/2010. The taxpayer is the assignor who requires the reinsurance service from the "eventual insurance company".

LEGAL PROVISIONS: Supplementary Law No. 126, of January 15, 2007, Art. 4; Decree-Law No. 73, of November 21, 1966, Art. 4; Act No. 9.718, of December 27, 1998, Art. 3, § 5 and § 6, item II, and Art. 14, item II; CNSP Resolution No. 330, of December 9, 2015, Attachment I, Art. 11, 12, 13 and 15; Susep Memo No. 359, of January 31, 2008, Art. 3; Act No. 10.865, of April 30, 2004, Art. 7, § 1, per text of Act No. 12.249, of June 11, 2010 and Art. 8, items I and II of the Attachment over Financial Services under the General Agreement on Trade in Services (GATS), executed during the Uruguay Round of the GATT (1994), and enacted by Decree No. 1.355, of December 30, 1994."

Demarest Advogados


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