BRAZIL Law and Practice Contributed by: Godofredo Mendes Vianna, Camila Mendes Vianna Cardoso and Lucas Leite Marques, Kincaid | Mendes Vianna Advogados
vis the total charter and service contract for purposes of qualifying for the WHT zero rate reduction. Hires exceeding these ratios will be subject to WHT at 15%, or at 25% for beneficiaries that are located in “low-tax jurisdictions” or subject to a “privileged tax regime”. As of 1 January 2018, the maximum charter ratios are as follows: • 70% for vessels with floating production, storage or discharge systems; • 65% for rig vessels for the drilling, completing and maintenance of wells; and • 50% for other types of vessels. The maximum charter ratios do not apply to vessels used in offshore support services. For foreign ship-owners with local subsidiaries in Brazil, it is important to mention that as of 2026, the Brazilian tax rules impose a 10% WHT over dividends distributions. IIn addition to the income tax’s effects, Brazilian indi - rect tax rules are undergoing a Tax Reform under Con - sumption Taxes between 2026 and 2032. Accordingly, the current indirect taxes (PIS, COFINS, IPI, ICMS and ISS) are being gradually replaced by two value added taxes (CBS and IBS) and a Selective Tax (IS). These new rules are still pending of regulation and will likely be affecting the taxation cross-border charters into Brazil. 9. Implications of Non-Performance, IMO 2020, Trade Sanctions and International Conflict 9.1 Force Majeure and Frustration Brazilian law defines force majeure as any necessary and unavoidable event enabling the protection of par - ties from liability in the event of delays or prevention of performance, as well as excluding liability for the breach of contract, as per Article 393 of the Brazilian Civil Code. In addition, the Brazilian Civil Code allows the parties to freely allocate the risks for force majeure
events in the contract, with reasons for why it is nec - essary to analyse each contract. Brazilian courts tend to consider unpredictable events or predictable events with unpredictable consequenc - es to be force majeure. To rely on force majeure, the party seeking to invoke the argument must demon - strate: • that there has been a force majeure event; and • how this event relates to the specific contract and the impossibility to comply with a contract obliga - tion. 9.2 Enforcement of the IMO 2020 Rule Limiting the Sulphur Content of Fuel Oil As a signatory country of the International Conven - tion for the Prevention of Pollution from Ships (MAR - POL), Brazil implemented national measures to meet with the guidelines of the IMO 2020 Regulation (IMO 2020). In view of this, the Brazilian National Agency for Petroleum, Natural Gas and Biofuels (ANP) under - took a review in its normative resolutions and, in 2019, enacted Resolution No 789/2019, imposing a cap of 0.5% sulphur content of any oil used on ves - sels. Despite the limit, the resolution allowed a 3.5% sulphur cap for vessels using exhaust gas cleaning systems (scrubbers), as long as the equipment is approved by a Classification Society and the scrub - bers carry an approved plan for compliance with the guidelines set forth in IMO 2020. In 2020 and 2021, the ANP enacted new resolutions seeking the improvement of the use of biofuels and the control of the fossil fuels used. As an example, producers and importers of marine fuel must submit a sample of the fuel to be marketed for analysis in order to obtain the “Quality Certificate”, a document detailing the composition of the fuel. Most recently, in November 2022, ANP issued Resolution No 903, fur - ther detailing the quality and sulphur levels allowed in bunker fuel and marine fuel, as well as quality proce - dures, and allowing for vessels with emissions control systems to use fuel with higher sulphur levels. For any violation of the ANP’s resolutions, administra - tive sanctions provided for by law shall be applied. These may vary from a mere application of a fine to
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