Cosit Private Letter Ruling on the Extension of IOF Exemption in Rural Insurance Operations
On 12/28/2020, it was published COSIT Private Letter Ruling No. 146/2020, which analyzed IOF exemption in rural insurance operations, provided for in article 19 of Decree-Law No. 73/1966.
According to the Private Letter Ruling, the IOF exemption in rural insurance operations is conditioned to the establishment of the Fund for supplementary coverage of rural insurance risks determined in Complementary Law No. 137/2010, which has not yet been implemented. After its creation, the exemption will be revoked as of July 1 of the year following the initial operations of the Fund.
The interpretation and application of IOF rules in rural insurance operations was determined by the Federal Revenue Service as follows:
- Exempt insurances – insurance for rural production (milk, meat, coffee, soy, cotton, corn, rice, beans, tobacco, honey, etc.) and insurance for goods owned by the rural producer or agricultural cooperative and used directly in rural activity (buildings for storage, warehouses, agricultural machinery and equipment, and transportation of the harvest – freight – when carried out by the rural producer or cooperative, with their own vehicles);
- Insurance subject to IOF (taxable operations) – insurance of manufactured products (by processing or transformation) even if they derive from agricultural activity, such as: powdered milk, heavy cream, chocolate milk, etc., and insurance of goods (i) related to the manufacturing (industrial equipment, buildings for storage, and insurance for the transportation of these manufactured products); and (ii) owned by third parties (transport carried out by third parties – freight contracted with a third party), buildings used for storage and agricultural equipment not owned by the rural producer).
Insurance companies should familiarize themselves with the interpretation object of the new Private Letter Ruling, conforming to it or analyzing occasional possibility of challenging it.