Originally published in the December 21, 2009 edition of World Tax Daily (Copyrights Tax Analysts)
The Administrative Council of Tax Appeals (Conselho Administrativo de Recursos Fiscais, or CARF), Brazil’s federal administrative tax court of appeals, has issued a series of tax directives (súmulas) for future CARF individual chambers.
In a December 8 extraordinary session, CARF issued 21 directives, 11 by the full CARF, 2 by CARF’s first chamber, and 8 by CARF’s second chamber.1
Free translations of the most important directives issued are provided below. Except where stated otherwise, the directives were issued by the full CARF.
The legal presumption of unreported revenue or income itself does not allow application of [an] aggravated assessed penalty; it is required to prove one of the situations of articles 71, 72, and 73 of Law No. 4,502/64.
Comment: Articles 71, 72, and 73 of Law No. 4,502/64 deal with tax evasion, fraud, and collusion, respectively.
The tax assessment issued by a tax auditor from a jurisdiction different from the taxpayer’s is valid.
CARF is not competent to review controversies related [to] administrative procedure for criminal purposes (Processo Administrativo de Representação Fiscal para Fins Penais).
Comment: The administrative procedure for criminal purposes is a procedure initiated by tax authorities to verify the existence, in theory, of a tax crime. Police and federal attorneys will follow up on the results of this procedure with further investigation and/or prosecution. Because of the criminal nature of the procedure, CARF held that as a tax court, it is not competent to review related cases.
Before the issuance of the tax assessment based on the presumption of unreported income, all coholders of a bank account must be notified to prove the origin of the funds deposited in the account under the penalty of nullity of the assessment.
Cash deposits [made in bank accounts] belong to the persons indicated in the bank’s database unless one can prove with proper and valid documentation that the account was used by third parties.
The tax return filed after the beginning of a tax audit does not produce any valid effect against any eventual tax assessment [related to income declared in said late tax return].
In tax assessments for unreported income based on the unknown origin of cash deposits, the imposition of the aggravated assessed penalty is valid when proven that resources have been moved using bank accounts of intermediate persons.
The taxable event for the assessment of personal income tax for unreported income based on unknown cash deposits [in bank accounts] is deemed to occur on December 31 of the relevant year. (CARF, second chamber)
Comment: This directive settles the controversy over when the taxable event was deemed to occur for purposes of computing interest. If the taxable event was deemed to occur at the time of the cash deposit, interest could be computed earlier than December 31.
Income earned by technicians resident in Brazil, but at service of the United Nations and its specialized agencies, with which they have a contractual relationship, is not exempt from Brazil’s personal income tax. (CARF, second chamber)
Personal income tax does not apply on amounts received as indemnity for expropriation [carry out by the government]. (CARF, second chamber)
The [federal] Rural Property Tax is not levied on inundated areas for formation of reservoirs of hydroelectric plants. (CARF, second chamber)
- Conclusion
The unusually high number of directives issued by CARF in one session seems to indicate that the court is trying to eliminate taxpayer uncertainty regarding subjects that have been constantly reviewed by the court.
FOOTNOTE
1 CARF has three chambers with 10 members each. CARF’s president and vice president are members of all three chambers. The full CARF has 26 members.
END OF FOOTNOTE
David Roberto R. Soares da Silva