Brazilian Federal.
Revenue Service in Rio de Janeiro. The shipping companies say that the Federal Revenue increased the time frame for analysis of requests for the qualification to Repetro, a special customs regime that suspends collection of federal taxes in importation of goods used by the oil and gas industry. They allege after months of processing, several requests for qualification to Repetro started being denied by 7th Region’s Customs Administration Division (Diana) of the Federal Revenue, which rebuts the accusations.
The controversy, which started in 2009, gained new ingredients after Norskan Offshore, a Brazilian company associated with the Norwegian group DOF, sought legal remedy and obtained an in limine decision guaranteeing the vessel “Normand Borg” the right to qualify under Repetro. The vessel was already operating for Petrobras based on a 2003 contract entered into on a “time charter” modality. This type of contract dictates that the company chartering the ship may use it for a certain time. Norskan wanted to extend Repetro’s term but its request was denied by the Federal Revenue.
This was the first case of a company that sought legal remedy to object Diana’s decision about chartering. The most common path for companies in situations like this one has been to file administrative appeals at the Federal Revenue, which tends to extend the process even longer. Another alternative is to enter a temporary admission process for the vessel with payment of prorated taxes, according to the time the vessels will stay in Brazil. This hypothesis represents an additional cost of 30% for the company.
The discussion between shipping companies and the Federal Revenue is about the time charter contract, the same object that led Norskan to go to Court. Under the companies’ standpoint, Diana’s interpretation is that the time charter does not include services and therefore would not qualify for Repetro. This viewpoint by the Federal Revenue would be upheld based on a Superior Court of Justice’s decision that says that time charter does not pay ISS, due to being a complex contract. For companies, a complex contract means diversity of services plus rental of movable assets and it does not allow the breakdown for fiscal purposes. “The Federal Revenue’s interpretation that ‘time charter’ does not entail service is completely wrong” says a source of the sector.
Lawyer Camila Mendes Vianna Cardoso, who represents Norskan, affirms that the maritime support sector requires agility in decisions, once the cost of an idle ship is very high. “It is necessary to have clear rules on how much taxes one pays in Brazil”, says Camila. Ronaldo Lima, president of the Brazilian Association of Maritime Support Companies (Abeam), analyzes that the 7th Region’s Diana has made “rather over the top” requirements. “These requirements make the entry of foreign vessels in the country difficult, and foreign vessels are majority in the maritime support sector in the country”, states another source.
The discussion on the charter divides Abeam itself. The foreign companies are more interested in importation of vessels. On the other hand, domestic companies tend to privilege the Brazilian flag, once some have fleet under construction in the country in order to meet Petrobras’ increasing demand for support vessels. One of the sector’s complaints has been regarding Ordinance 357, published by the 7th Region in 2009, which increased red tape, they allege.
Paulo Ximenes, head of 7th Region’s Diana, says since he took office in December 2008, he saw the need to “discipline” the requests for qualification to Repetro. “Contracts did not meet the minimum formalities required in the administrative proceeding” he says. He recognizes that the analysis of proceedings has been narrowed, but understands that the number of Repetro qualifications at the 7th Region’s Diana is near average, which would be approval of one declaratory act (ADE) per day. The ADE is the instrument whereby Repetro is granted.
In the private sector, the evaluation is that the Federal Revenue became more flexible in regards to the matter, however this tendency would not be all-encompassing. The data Valor had access to shows that in 2009, the 7th Region’s Diana approved and published 222 ADEs, 55% less than the 491 ADEs of 2008. From January until March 10, 2010, 69 ADEs had been approved and published by the 7th Region’s Diana.
Camila Mendes Vianna - LAW OFFICES CARL KINCAID - Mendes Vianna Advogados Associados - www.kincaid.com.br
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