Inclusion of royalties in the custom value of goods for import tax

The royalties paid abroad must be included in the customs value of the imported goods for the purpose of calculating the amounts due for Import Tax – II, PIS / Pasep and COFINS-Import and IPI?

In answering such questioning, the class of the Third Judgment Section of CARF stated that “under the terms of arts. (…), the royalties and license fees relating to the goods (…) shall be added to the price actually paid or payable for the imported goods (…) even if the exporter is not the holder of the trade marks and beneficiary “(Judgment nº 3401-004.483)

This manifestation of CARF resulted from the analysis of a voluntary appeal by a retail taxpayer against a decision that had maintained a tax assessment that identified the non-inclusion of the value of royalties in the composition of the customs value of imported goods which, according to the Inspection, would be at odds with the Customs Valuation Agreement – AVA.

According to the tax report, the taxpayer had signed several international contracts for the use of trademarks in Brazil, marks that could be stamped on various goods, especially garments imported by the taxpayer.

In the reasons for the assessment, the Supervision stated that art. 8, 1, “c” of the AVA, promulgated by Decree No. 1355/94, established that the value of royalties and licenses paid as “condition of sale of goods” should be increased in determining the customs value attributable to such goods. Therefore, considering that the contracts signed by the taxpayer imposed this condition for the use of the trademarks in Brazil, it would be undue to exclude such royalties from the composition of the customs value.

In contesting the findings of the indictment, the taxpayer alleged that the royalties were intended for persons other than those exporters. Indeed, while the value of imported goods was intended for manufacturers of imported goods, the value of royalties for use of the brands in Brazil was directed to the actual holder of such intangibles. Thus, the rule outlined in the AVA would not be applicable in the case in question, since “the condition of sale mentioned in the AVA must be interpreted as that imposed by the seller himself for the acquisition of the merchandise.” Considering that the exporter was not the owner of the marks which are the subject of the contracts signed by the taxpayer, there was no condition imposed by the exporter in that regard.

Under the guiding vote of the judgment, it was pointed out that the contracts examined provided that the royalties would be calculated on the basis of net sales, which would be calculated on the basis of the price paid to the manufacturer of the goods abroad. Furthermore, it was identified in the contracts that the manufacturers of the goods exported to Brazil should be “expressly authorized by the owner of the mark”, even if they are non-related companies to the trademark holders and beneficiaries of the royalties paid by the taxpayer.

Considering this last aspect of the contract for the payment of royalties, the Director-Rapporteur concluded that “the licensors control all the ranges of the production chain, from the manufacturing to the sale of the products licensed by it”, and this control was present ” through strict contractual clauses, which do not give the licensee the exclusivity of the marks and allow the audit in its accounting records. “

Thus, it seemed to the Rapporteur-Counsel that it would be impossible to dissociate the law regarding the use of the trademarks in Brazil from the importation of goods, not preventing the value of the importation from being destined for the legal entity other than that receiving the royalties. That is, the conviction was established that the royalties, effectively, constituted a condition of sale of the goods imported by the taxpayer, thus attracting the rule of art. Art. 8, 1, “c” of the AVA, an international agreement to which Brazil is obliged to comply and respect, failing to frustrate the international cooperation that is expected of the contracting parties adhering to an international treaty.

The Customs Valuation Agreement must be considered in a systemic view, so that “it can be considered in a systemic view,” said the Counselor-Rapporteur, using a ruling in a previous judgment dealing with the same subject (Judgment No. 3401-003.194) it must be understood that royalties and license fees, irrespective of the designation given to them by national legislation (duties, fees, charges, fees, etc.), must be added to the price paid or payable for customs valuation purposes , if they must be paid by the buyer, directly or indirectly, and constitute a condition for the sale of the goods.

Analyzing the factual situation placed, especially the conditions put in the trademark licensing agreements, it was identified that the payment 

of royalties constituted a condition for the sale of the goods, not because the non-payment of such royalties was in the event of termination of the agreements entered into with the manufacturers of the imported goods, despite the absence of any corporate relationship between such manufacturers and the licensors of brands.

The fact that the exporters are not the beneficiaries of the royalties, as well as the fact that the contracts between the importer and the exporter do not provide for the payment of royalties, were not considered as factors preventing the inclusion of the royalties in the customs value of the goods, made it clear “that foreign exporters, even though they are not the owners of the trade marks, necessarily owe and were licensed by them (licensor) to produce the goods”.

Thus, by a majority of votes, without a declaration of vote for the current arrears, the tax assessment remains to be required to include the value of the royalties in the determination of the customs value of imported goods, which is paid as a condition for the sale of such goods and , consequently, the requirements for collection of IPI, II, PIS / Pasep and COFINS-importation on this portion of value added to the customs value of the goods were maintained.

Leave a Reply

Your email address will not be published. Required fields are marked *