New services tax rule affects the technology market
Tax on Services starts to be charged on services such as streaming and data storage and requires adjustment of the sector to keep in compliance
The National Congress approved at the end of December 2016 the Complementary Law No. 157/16, extending the collection of Tax on Services (ISS) to sectors that were not yet taxed, especially those geared to technology and content on the Internet.
Among the important sectors of technology that will be taxed are streaming, data processing, storage and hosting, and application, software and electronic games development services, among others.
Regarding these new ISS levies, questions about the actual framing as service provision can be raised, which results in an obligation to do, and companies must be aware of the rules by municipalities in order to adjust to the new tax obligation.
The new legislation has also established the minimum rate of 2%, which was already provided for in the Federal Constitution, and the impossibility of the municipalities to grant any tax incentive that results in a lower tax burden than that resulting from the application of the minimum rate.
“The tax environment is changing due to the dynamics of the technology sector, which puts to the companies in the segment the challenge of keeping up do date to remain in compliance and, at the same time, competitive.”
Carolina Velloso Verginelli, Deloitte Tax partner and expert in indirect taxes
Accountants and auditors with more responsibility against acts of non-compliance
Professional accountants and independent auditors will play a larger role in identifying, mitigating and reducing risks against corruption, fraud and money laundering
Brazil should adopt, from July 2017, a new international ethics standard proposed by the International Ethics Standards Board for Accountants (IESBA), which establishes that accountants and independent auditors should alert the management and those in charge of governance of the company when they discover, in the exercise of their functions, deviations from laws and regulations, such as corruption, fraud and money laundering.
The standard should also provide for the reporting to regulatory bodies, such as, for example, the Securities and Exchange Commission (CVM), the Financial Activities Control Council (COAF), the Federal Attorney’s Office (MPF) and the Federal Police.
With the measure, the accountants will be allowed to override the duty of confidentiality in the terms of the Code of Ethics in order to publicize deviations to the competent public authorities in certain circumstances, thus raising the reputation of the profession as a safety rail for reliable companies and contributing to a healthy global financial system.
“The standard will stimulate a greater responsibility among organizations, will help to protect the involved parties against damages resulting from the violation of laws and regulations, and will strengthen the reputation of the category. Its implementation will have a significant impact in Brazil and other countries, not only for the accountants and independent auditors, but also in the regulatory and judicial spheres.”
Sandro Moreno, Deloitte Financial Advisory director for the forensic practice
Regulations for the sugar and energy sector enters into force
Producers of ethanol have until August 2017 to conform to the ANP's environmental protection standards
Companies producing ethanol have an important challenge in 2017: meet the regulatory requirements for the sugar and energy sector established by a resolution from the National Agency for Petroleum, Natural Gas and Biofuels (ANP). The standard regulates the entire chain of movement of biofuels in Brazil, including ethanol, previously considered an agricultural byproduct and not supervised by the Agency.
With the objective of ensuring industrial safety and environmental protection in the production of ethanol, the regulatory agency stipulated a period of adjustment that expires on August 31, 2017. However, according to a survey conducted by the Agency itself, only 5% of the segment is in accordance with the standards required, which may significantly impact the industry and involve severe penalties for the mills. This is the time for producers to make the necessary adjustments in order to be in compliance with industry regulations, in addition to prepare for the challenges of the transition.
“This is a new subject for a large part of the producers, which will now be in a much more regulated environment. This will require an initial effort to evaluate the current stage of adhesion to the new requirements and, subsequently, to the adequacy itself.”
Patricia Muricy, Deloitte Risk Advisory partner
Upcoming reforms reinforce good governance practices in public biddings
New processes for hiring and supervision are among the main changes proposed by the bill
Under discussion at the Chamber of Deputies, the Bill No 559/13 amends the regulation of public biddings and public administration contracts and establishes a new legal framework for these practices.
Among the measures, the Bill proposes guidelines for the oversight by the Federal Court of Accounts (TCU), such as further technical details to justify the request for construction project interruption. The bill also proposes harsher punishments for crimes of fraud to competition, in public biddings and in public contracts, rising to up to eight years the sentence of imprisonment.
Another great impact amendment proposes that service companies should negotiate the terms of the contract directly with public servants. The amendment imposes a more flexible environment for the negotiation, which will require even more maturity on the part of professionals, both from private companies and from public agencies involved in bidding processes, since it will be necessary to ensure transparency in the management, regularity in the hiring of assets, projects and services, and safety in operations involving the public administration.
In the context of risks, issues relating to the participants, the traded price and the bidding procedure itself must be considered in the development of a preventive and corrective compliance program.
“With the aim of protecting themselves, companies must establish guidelines that assist their professionals in the interaction with public officials. And, to remain mature in relation to contracts with the public administration, they should consider in their compliance program the risk and internal control assessments, audit, due diligence and whistle blower channels, among other prevention and correction processes.”
Eduardo Martins, Deloitte Financial Advisory lead partner