Brazil vs Syngenta Protecao de Cultivos LTDA, September 2016, CARF Case No 16561.000199/2008­16

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Syngenta had been issued a tax assessment related to two tax violations: (1) incorrect ascertainment of the PRL 60, in disagreement with IN SRF no. 243, of 2002, in the ascertainment of transfer prices, and (2) omission of revenues arising from inventory differences.

Syngenta filed an opposition claiming (1) illegality of IN SRF 243, of 2002; (2) undue inclusion of freight, insurance and taxes in the price charged.
(3) inadequacy of the revenue omission and (4) inapplicability of default interest on ex-officio fine.

In the lower court, the opposition was partially granted, in order to partially exempt the assessments related to the omission of revenues arising from inventory differences. Due to the exonerated tax credit, the President of the Panel then filed an ex-officio appeal.

A voluntary appeal was filed by Syngenta, returning the matters presented via opposition, which was heard by the second instance (CARF’s Ordinary Panel), which upheld the decision of the DRJ in full, dismissing the ex-officio appeal and dismissing Syngenta’s voluntary appeal.

Syngenta then filed a special appeal and the PGFN filed counterarguments. The appeal was accepted by an order of examination of admissibility, in order to proceed with the same matters claimed in the opposition: (1) illegality of IN SRF 243, of 2002; (2) undue inclusion of freight, insurance and taxes in the price charged; (3) inadequacy of the omission of revenues and (4) inapplicability of late payment interest on the ex-officio fine.

Decision of the Court

The appeal of Syngenta was dismissed by the court.

There is no illegality in IN SRF 243/2002, whose mathematical model is an evolution of previous normative instructions. The methodology takes into account the share of added value in the total cost of the product resold. By adopting the proportion of the imported good in the total cost, and applying the profit margin presumed by legislation to define the resale price, we find a parameter price value compatible with the purpose of the PRL 60 method and of the transfer prices.

The transaction between related persons (in which the practiced price is verified) and the transaction between non-related persons, in the resale (in which the parameter price is ascertained) must preserve equivalent parameters. In analyzing the PRL method, the comparability between prices performed and parameter prices, under the viewpoint of paragraph 6 of article 18 of Law 9430/1996, operates according to a mechanism in which freight, insurance and import taxes are included in the ascertainment of both prices.

With Law 12,715 of 2012 (conversion of Provisional Measure 563 of 2012), the comparability mechanism underwent a change in relation to Law 9430 of 1996, in order to exclude freight, insurance (subject to certain conditions) and import taxes from the calculation of prices charged and parameters.

The ex-officio fine, a pecuniary penalty, is part of the principal tax liability and, consequently, of the tax credit, which is subject to default interest after maturity, pursuant to articles 113, 139 and 161 of the CTN and article 61, paragraph 3 of Law 9430/96.

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