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Date: January 28, 2020
Posted by: CPDMA Team

Carf understands that mining company's holding company was created to avoid paying taxes

For the tax authorities, the Spanish holding of a company incorporated into CNS Mineração aimed to avoid the incidence of IRPJ and CSLL.

Nacional Minério S/A (Namisa), a company merged into CSN Mineração, will pay taxes on profits of an indirect subsidiary abroad for 2008 in the amount of R$ 236.8 million, excluding monetary and interest adjustments. The decision of the Administrative Council of Tax Appeals (Carf) took place on Wednesday of last week (15/1). The company can still file an embargo on the decision or file a lawsuit.

According to the tax indictment, the company created a scheme abroad to evade the Brazilian tax authorities. According to the records, Namisa explored iron ore in Brazil and, when it was going to export, instead of selling to the direct exporter, it sold to a trading company of the same business group, located in the free zone of Madeira Island, therefore , tax free. The trading company did the negotiations with the iron ore buyers and the profit from the operations stayed on Madeira Island.

According to the Attorney General's Office of the National Treasury (PGFN), in order to prevent the foreign trading company's profit from being taxed by the Brazilian parent company on each calculation balance, as Brazilian law provides, Namisa created a holding company in Spain called Investments CSN Spain. Thus, according to the agreement signed between Brazil and Spain to avoid double taxation, the profit was taxed only in Spain and not in Brazil.

“The interposition of the holding company had an elusive purpose, so much so that the manager of the holding in Spain was the same as the trading company and lived on Madeira Island,” said National Treasury attorney Moisés Pereira, coordinator of action before Carf.

Thus, for the Brazilian tax authorities, the Spanish holding company had an abusive intention to avoid the levy of Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) of the foreign subsidiary. Therefore, the auditor drew up the tax assessment and, for the calculation, he used the trading profit contained in the holding company's consolidated balance sheet.

Defense

The defense argued that Brazil could not tax the profits earned in Spain by the subsidiary on the island of Madeira, as it can only tax a subsidiary and not an entity with its own legal personality existing in the other State. “What is the legal security that the taxpayer has if the inspector does not obey the normative instruction of the Federal Revenue?”, questioned the lawyer of the company Roberto Duque Estrada, in oral argument.

However, the argument was not accepted by most of the councilors who accepted the thesis of the National Treasury that taxation of trading was possible. "There is no doubt that the taxation of results earned by an indirect subsidiary located in a tax haven dependency is perfectly valid", said the rapporteur Cristiane Silva Costa, during the reading of the vote.

Through the press office, Companhia Siderúrgica Nacional reported that the company does not comment on court decisions.

The case in question is being processed at Carf under number 10880.728246/2012-87.

Source: Flávia Maia via Jota.

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