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New Normative Instruction of the BPTO Regarding IP Contracts: Changes and Challenges

by Cândida Ribeiro Caffé

August 23, 2017

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On July 1st, 2017, Normative Act 70, issued by the BPTO on April 11, 2017, became effective. This normative act intends to substantially simplify the administrative procedure of recordal of industrial property licenses and assignments, as well as registration of technology transfer and franchise agréments.

Although the approval of such agreements remains necessary, the position to be adopted by the BPTO during the recordal procedure is expected to change, in order to reduce BPTO’s scope of analysis and make the entire procedure less bureaucratic, so that the freedom to contract prevails. Thus, the Certificate of Recordal shall simply reflect the amounts, payment conditions and term stated by the parties, who shall be responsible for the validity and lawfulness of the agreement or invoice submitted to the BPTO. The Certificate of Recordal shall be issued with a disclaimer that “the BPTO did not review the amount or term of the agreement under a tax or foreign exchange perspective”.

Nevertheless, it is important to mention that there was no change in Brazilian tax and foreign exchange rules, which means that the parties should become directly responsible to evaluate and comply with such laws for remittance purposes. Please note that international IP transactions still require recordal at the BPTO and registration at the Brazilian Central Bank. Further, such agreements should still comply with Brazilian tax and foreign Exchange regulations, which were not affected by this new Normative Act, as it just simplified the recordal proceedings before the BPTO.

Even though some remittance of payments which were totally impossible in the past (due to the lack of a Certificate to support the transaction) shall now become practically possible, contractual parties shall be entirely responsible for compliance with applicable laws and should carefully assess the specific case taking into account all Brazilian laws currently in force. In this scenario, it will be even more important to conduct a careful and detailed analysis of each situation, as the BPTO
will no longer assess the agreement from a tax or foreign exchange regulations perspective.

In addition to the flexibility already mentioned, as the new ruling directly limited BPTO’s power to interfere in some terms and conditions of the agreements, the new normative act also has the merits to give more transparency to the recordal process, as it lists the required documents and specifications for protocol. The parties, on the other hand, shall be fully responsible for the validity and accuracy of the agreement, invoices and documents provided in the process.

Notwithstanding, there should probably be a transition period, especially considering that many understandings consolidated by the BPTO over the past decades have not been mentioned in the new normative act.

It is important to celebrate the benefits of such normative act, without however cutting out a serious and detailed analysis of each case, as all tax and foreign exchange rules prior considered by the BPTO remain valid and in full force, even though in need of updating. Although some restrictive understanding applied by the
BPTO during the last years could indeed be questioned under a legal perspective, some restrictions result from the legislation itself, which is segregated in several different old laws and regulations that give rise to several controversies.

Therefore, it is extremely important to conduct a careful analysis of each case, under penalty of a possible repatriation of amounts unduly remitted abroad, payment of a penalty and impossibility of tax deduction of the remitted amounts, as well as payment of a possible difference in the income tax and social contribution on the net income incurring from the disallowance of expenses, in addition to a penalty for delay in compliance with accessory tax obligations (without prejudice to the penalty already applied to the undue remittance). Please note that possible consequences for the lack of compliance with the applicable tax and foreign exchange rules may not have immediate effects, but should last for several years, with hard consequences to the involved companies.

Our Firm played an active and constant part on the process of approval of this normative act, proposing changes and negotiating with the BPTO, and remains at your service to assist you with any questions or assistance you may need.

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Cândida Ribeiro Caffé

Partner, Lawyer, Industrial Property Agent

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