🚢 In a split decision dated February 20 and published on March 28, 2024, the 3rd Chamber of CSRF in Brazil (Superior Administrative Court of Tax Appeals) stated that tax authorities are allowed to consider the “essence” of a charter party agreement instead of its “form”, particularly if that “form” is used to shield the allocation of prices between that agreement and a technical services contract (priced at a lower amount and coincidentally subject to a tax on payments for technical services, known in Brazil as “CIDE”).
Page 12 of the CSRF ruling says that the contracts (i.e., charter party and technical services) were signed with companies belonging to the same business group and were executed simultaneously. They were also tied to one another: if the client either extended the term of one contract or rescinded it, the other contract would have followed suit.
One of the dissident councilors declared their vote and, on page 36, said that, given (a) that the client/taxpayer in this case is a beneficiary of a special regime for oil companies (“REPETRO”), and given (b) that this regime requires charter party and technical service contracts to be segregated from and simultaneous to one another, it is somewhat strange that tax authorities on one side impose certain conditions for access to the special regime and, on the other, use those conditions against the taxpayer.
The full decision is attached as a PDF to this post (in Portuguese). If you are interested in the topic of “substance over form” assessments in Latin American tax practice, here are some recommended articles:
✅ “¿Es posible la aplicación del principio de sustancia sobre la forma en Chile, en concordancia con el principio de legalidad tributaria?” (“Is it possible to apply the principle of substance over form in line with the principle of tax legality in Chile?”), by Javiera Bobadilla. Published in 2013 by Universidad Diego Portales. Available at: https://shorturl.at/jmQX8
✅ “La Elusión Fiscal en Colombia” (“Tax Avoidance in Colombia”), by Paul Cahn-Speyer Wells. Published in 2009 by Universidad de los Andes – Colombia. Available at: https://shorturl.at/azHUY
✅ “El principio de legalidad y reserva de ley en materia tributaria” (“The principle of legality and reservation of law in tax matters”), by Gabriela Inés Tozzini. Published in 2003 by Thomson Reuters La Ley in Argentina. Available at: https://shorturl.at/zGHW6
✅ “O Propósito Negocial como Condicionante de Validade do Planejamento Tributário” (“Business Purpose as a Condition for the Validity of Tax Planning”), by Tatiane dos Santos Loures Nascimento and Rogério Dias Correia. Published in 2020 by ANPCont in Brazil. Available at: https://shorturl.at/uxzLT 🌎
