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PROVISIONS FOR TAX, SOCIAL SECURITY, LABOR, CIVIL, ENVIRONMENTAL RISKS AND JUDICIAL DEPOSITS
 12 Months Ended
Dec. 31, 2021
PROVISIONS FOR TAX, SOCIAL SECURITY, LABOR, CIVIL, ENVIRONMENTAL RISKS AND JUDICIAL DEPOSITS

 

21.PROVISIONS FOR TAX, SOCIAL SECURITY, LABOR, CIVIL, ENVIRONMENTAL RISKS AND JUDICIAL DEPOSITS

 

 

Claims of different nature are being challenged at the appropriate courts. Details of the accrued amounts and related judicial deposits are as follows:

 

                Consolidated
    Accrued liabilities   Judicial deposits
    12/31/2021   12/31/2020   12/31/2021   12/31/2020
Tax   111,572   134,645   78,260   67,819
Social security   1,270   8,170        
Labor   304,744   328,334   218,200   212,737
Civil   139,824   151,776   17,869   17,683
Environmental   16,942   12,463   2,739   2,444
Deposit of a guarantee           22,737   24,434
    574,352   635,388   339,805   325,117
                 
Classified:                
Current   66,047   81,073        
Non-current   508,305   554,315   339,805   325,117
    574,352   635,388   339,805   325,117

 

The changes in tax, social security, labor, civil and environmental provisions in the year ended December 31, 2021, can be summarized as follows:

 

                        Consolidated
    Current + Non-current
Nature   12/31/2020   Additions   Accrued charges   Net utilization of reversal   Acquisition of Elizabeth   12/31/2021
Tax               134,645              2,296                5,942                      (36,214)                         4,903             111,572
Social security                  8,170                   17                     25                        (6,942)                                                   1,270
Labor               328,334            38,171              30,929                      (92,690)                                               304,744
Civil               151,776              3,264              21,261                      (36,477)                                               139,824
Environmental                12,463              7,554                1,223                        (4,298)                                                 16,942
                635,388            51,302              59,380                    (176,621)                         4,903             574,352

 

The provision for tax, social security, labor, civil and environmental risks was estimated by Management and is mainly based on the legal counsel’s assessment. Only lawsuits for which the risk is classified as probable loss are provisioned. Additionally, tax liability from actions initiated by the Company is included in this provision and is subject to SELIC (Central Bank’s policy rate).

 

Tax proceedings

 

The main lawsuits that are considered by the external legal advisors as probable loss, which are part of CSN or its subsidiaries, of a tax nature, are (i) some tax assessment notices; (ii) divergences between calculated and paid ICMS; (iii) Requests for compensation not approved due to the lack of credit rights.

 

Labor proceedings

 

The Company appears as a defendant, on December 31, 2021, in 8,884 labor claims. The majority of claims for actions are related to subsidiary and / or joint liability, equal pay, unhealthy and hazardous work premiums, overtime, health insurance, indemnity claims arising from alleged involvement of occupational diseases or accidents at work, intra-day break and differences in profit sharing in the years 1997 to 1999 and 2000 to 2003.

 

During the year ended December 31, 2021, there were addition or write-off movements in labor lawsuits arising from the definite conclusion and the constant revision of the Company’s accounting estimates related to the provision for contingencies that take into consideration the different nature of the claims made, as required by the Company’s accounting policies.

 

Civil proceedings

 

Among the civil lawsuits in which he is a defendant, there are mainly suits for damages. Such processes, in general, result from work accidents, occupational diseases, contractual discussions, related to the Group’s industrial activities, real estate actions, health insurance.

 

Environmental Proceedings

 

The main environmental lawsuits that are considered by the external legal advisors to be probable losses, to which CSN or its subsidiaries are a party, are (i) administrative infraction notices, for alleged environmental violations; (ii) judicial annulment actions and tax foreclosures, arising from environmental fines; (iii) procedural fines for alleged non-compliance with court orders.

 

Among the environmental administrative / judicial proceedings in which the Company is a defendant, there are administrative procedures aimed at finding possible occurrences of environmental irregularities and regularizing environmental licenses; at the judicial level, there are actions for the enforcement of fines imposed as a result of such alleged irregularities and public civil actions with a request for regularization combined with indemnities, which consist of environmental recomposition, in most cases. Such processes, in general, result from discussions of alleged impact to the environment related to the Company’s industrial activities.

 

 

Administrative and judicial proceedings

 

 

The Company does not make provisions for lawsuits, which Management’s expectation, based on the opinion of legal counsel, is a possible loss. The following table shows a summary of the balance of the main matters classified as possible risk compared to the balance on December 31, 2021 and 2020.

 

        Consolidated
    12/31/2021   12/31/2020
Assessment Notice and imposition of fine (AIIM) / Tax Enforcement - Income tax and social contribution - Capital gain on sale of NAMISA's shares      13,015,938      12,694,021
         
Assessment Notice and Imposition of fine (AIIM) / Tax Enforcement - Income tax and Social contribution - Disallowance of deductions of goodwill generated in the reverse incorporation of Big Jump by NAMISA.        4,242,051        3,930,093
         
Assessment Notice and Imposition of fine (AIIM) / Tax Enforcement  - Income tax and Social contribution - Disallowance of interest on prepayment arising from supply contracts of iron ore and port services        2,017,602        1,956,898
         
Assessment Notice and imposition of fine (AIIM) - Income tax and social contribution due to profits from foreign subsidiaries for years 2008, 2010, 2011, 2012, 2014, 2015 and 2016.        4,137,519        3,461,574
         
ICMS - SEFAZ/RJ - Electricity Credits           867,521           841,401
         
Offset of taxes that were not approved by the Federal Revenue Service - IRPJ/CSLL, PIS/COFINS and IPI        1,660,888        1,845,379
         
ICMS - SEFAZ/RJ  - Disallowance of the ICMS credits - Transfer of iron ore           614,528           624,645
         
ICMS - Refers to the transfer of imported raw material at an amount lower than the price disclosed in the import documentation           326,361           317,848
         
Disallowance of the tax loss and negative basis of social contribution arising from the adjustments in the SAPLI           600,895           583,478
         
Assessment Notice and imposition of fine (AIIM)/ Action for annulment - IRRF- Capital Gain of CFM vendors located abroad           266,649           260,326
         
CFEM – difference of understanding between CSN and ANM on the calculation basis         1,079,951        1,051,661
         
ICMS - SEFAZ/RJ - Assessment Notice -  questions about sales for incentive area        1,142,386        1,111,034
         
Other tax lawsuits (federal, state, and municipal)        3,877,976        3,886,976
         
Assessment Notice and imposition of fine (AIIM) -  Charge of IRRF- RFB  - Business Combinations of CSN Mineração held in 2015.           889,179           862,324
         
ICMS - SEFAZ/RJ - Disallowance of credits on acquisitions of Intermediate Products           562,307           498,002
         
Assessment Notice and imposition of fine (AIIM) - RFB -  Disallowance of credits PIS/COFINS of inputs and freight        1,116,228        1,082,517
         
Social security lawsuits           214,323           233,116
         
Action to discuss the balance of the construction contract – Tebas           507,719           487,124
         
Action related to power supply payment’s charge - Light           324,371           288,390
         
Indemnity action due to the supply contract termination - Indumill (1)                                 237,795
         
Enforcement action applied by Brazilian antitrust authorities (CADE)            98,740            95,833
         
Civil Public Action - Districts / School / Nursery relocation-CdP Dam            14,876            12,207
         
Other civil lawsuits           845,043           777,850
         
Labor and social security lawsuits        1,536,967        1,506,626
         
Tax foreclosures – Fine – Volta Redonda IV           104,400            94,304
         
ACP landfill Márcia           306,389           306,389
         
Other environmental lawsuits           424,143           257,965
       40,794,949      39,305,776
(1)The indemnity lawsuit filed by Indumill in the amount of R$267 million was definitively dismissed, with a favorable decision for CSN, resulting in the closing of the case and the write-off of the risk amounts.

 

In the first quarter of 2021, the Group was notified of an arbitration procedure based on an alleged unfulfillment of iron ore supply contracts. The counterparty asks for approximately US$1 billion and the Company has no knowledge of the basis used in the allegations presented, as well as has no knowledge of the basis for the estimates of the amount asked. As opposed, the Company understands to be a creditor in the contracts. Finally, the Company informs that has responded the arbitration requirements in conjunction with its legal counselors and is currently at the initial stage of its defense. The Company expects the arbitration will be concluded in 2 to 3 years. The relevance of the arbitration to the Company is related to the amount attributed to the cause and its eventual financial impact. The discussion involves arbitration disputes initiated by both parties.

 

The Company has been offering judicial guarantees (Guarantee Insurance / Letter of Guarantee) in the total amount updated to December 31, 2021, of R$4,732,009 (December 31,2020 R$ 4,542,786), as determined by the procedural legislation in force.

 

The assessments made by legal advisors define these administrative and judicial proceedings as a possible risk of loss and, consequently, no loss provisions have been recognized in accordance with Management’s judgment and with the Accounting Practices adopted in Brazil.

 

Accounting Policy

 

Only provisions estimated as probable risk of loss are recorded, substantiated in the assessment of our legal advisors, and at amounts that will be required to settle the litigations. The obligation is updated in accordance with the evolution of the lawsuit or financial charges incurred and will be reversed if the estimated loss is no longer considered probable due to changes in circumstances or derecognized when the obligation is settled.