BRAZIL Law and Practice Contributed by: Godofredo Mendes Vianna, Camila Mendes Vianna Cardoso and Lucas Leite Marques, Kincaid | Mendes Vianna Advogados
7. Ship-Owners’ Income Tax Relief 7.1 Exemptions or Tax Reliefs on the Income of Ship-Owners’ Companies Brazilian tax legislation provides for a zero with - holding tax (WHT) rate reduction on the payment of charter hire abroad, unless the beneficiary is located in a “low-tax jurisdiction”, in which case WHT is triggered at 25%. For charter-hire payment, credit or remittances in the so-called “split contract structure” applied to oil and gas exploration and production (E&P) and regasification activities, there are maximum charter ratios vis-à-vis the total charter and ser - vice 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 ves - sels used in offshore support services. Brazil has been adapting its accounting rules to the International Financial Reporting Stand - ards (IFRS) standards, and Brazilian charterers have been required to comply with the so-called “CPC 06” (IFRS 16) on operational leases since 1 January 2019.
Occasional changes will not affect the taxes to be paid in Brazil pursuant to the IRS Normative Ruling 1889/2019. In Brazil, shares have been nominative since the 1990s. There have been no recent changes in the corporate legislation concerning the matter. There is no specific legislation in Brazil relating to the liquidation of assets outside the country, nor relevant time requirements; the standard liquida - tion rules are to be followed. It is important to bear in mind, however, that the Brazilian legislative house has just enacted a new Tax Reform (Constitutional Amendment 132), changing several rules regarding the taxa - tion on services and goods. The new tax regime should start to be enforced in 2026, progres - sively. 8. Implications of Non- Performance, the IMO 2020, Trade Sanctions and the War in Ukraine 8.1 Force Majeure and Frustration Brazilian law defines force majeure as any nec - essary and unavoidable event enabling the protection of parties 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 par - ties to freely allocate the risks for force majeure events in the contract, with reasons for why it is necessary to analyse each contract. Brazilian courts tend to consider unpredictable events or predictable events with unpredictable consequences to be force majeure. To rely on
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