UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

Date of Report: May 3, 2022

Commission File Number: 001-39570

TIM S.A.
(Exact name of Registrant as specified in its Charter)

João Cabral de Melo Neto Avenue, 850 – North Tower – 12^th floor
22775-057 Rio de Janeiro, RJ, Brazil
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

Yes ☐ No ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

Yes ☐ No ☒

TIM S.A.

QUARTERLY INFORMATION on

March 31, 2022

TIM S.A.

QUARTERLY INFORMATION

March 31, 2022

Contents

INDEPENDENT AUDITOR’S REVIEW REPORT ON QUARTERLY INFORMATION

Shareholders, Directors and Officers

TIM S.A.

Rio de Janeiro - RJ

Introduction

We have reviewed the accompanying interim financial information, contained in the Quarterly Information Form (ITR) of TIM S.A. (the “Company”) for the quarter ended March 31, 2022, comprising the balance sheet as of March 31, 2022 and the statements of income and of comprehensive income for the three-month periods then ended, and the statements of changes in shareholders’ equity and of cash flows for the three-month period then ended, including the explanatory notes.

Management is responsible for the preparation of the interim financial information in accordance with NBC TG 21 – Interim Financial reporting, and IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the fair presentation of this information in conformity with the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of the Quarterly Information Form (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of review

We conducted our review in accordance with Brazilian and international standards on review engagements (NBC TR 2410 and ISRE 2410 - Review of Interim Financial Information performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

INDEPENDENT AUDITOR’S REVIEW REPORT ON QUARTERLY INFORMATION

Conclusion on the interim financial information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information included in the quarterly information referred to above are not prepared, in all material respects, in accordance with NBC TG 21 and IAS 34 applicable to the preparation of Quarterly Information Form (ITR) and presented consistently with the rules issued by the Brazilian Securities and Exchange Commission (CVM).

Other matters

Statements of value added

The quarterly information referred to above includes the statements of value added (SVA) for the three-month period ended March 31, 2022, prepared under the responsibility of the Company's management, and presented as supplementary information for IAS 34 purposes. These statements have been subject to review procedures performed in conjunction with the review of quarterly information to conclude that they are reconciled with interim financial information and accounting records, as applicable, and if their form and content are consistent with the criteria defined in NBC TG 09 “Statement of Added Value”. Based on our review, we are not aware of any fact that leads us to believe that these statements of value added were not prepared, in all material respects, in accordance with the criteria established in the Technical Pronouncement and is consistent with respect to the individual interim financial information and consolidated taken as whole.

Rio de Janeiro May 3, 2022

ERNST & YOUNG

Auditores Independentes S.S.

CRC-2SP015199/O-6

Fernando Alberto S. Magalhães

Accountant CRC-1SP133169/O-0

Explanatory notes are an integral part of the quarterly information.

Explanatory notes are an integral part of the quarterly information.

Explanatory notes are an integral part of the quarterly information.

Explanatory notes are an integral part of the quarterly information.

Explanatory notes are an integral part of the quarterly information.

Explanatory notes are an integral part of the quarterly information.

Explanatory notes are an integral part of the quarterly information.

Explanatory notes are an integral part of the quarterly information.

2022 First Quarter Highlights

From Volume to Value: customer base profile continuous transformation

·      Penetration of high value offers (>100Mbps) on TIM Live’s customer base reached 65%.

Continuous infrastructure evolution, with focus on quality and innovation

Revenue acceleration contributed to a solid EBITDA growth

* EBITDA normalized according to the items described in the Costs section (+R$ 20.3 million in 1Q22 and -R$ 743.1 million in 4Q21). Net Income normalized by: tax credit and other effects (-R$ 6.9 million in 1Q22 and -R$ 13.3 million in 4Q21) and impact from deferred and current taxes over the revenue generated through the I-Systems transaction (+R$ 509.2 million in 4Q21). Normalized Capex excludes the impacts related to the acquisition of the frequency auction licenses (R$ 3,585 million in 4Q21).

** According to the Estadão Melhores Serviços 2022 ranking published by the newspaper O Estado de S. Paulo.

Financial Performance

OPERATING REVENUE

* The Customer Platform includes revenues from new initiatives, such as Financial Services, Educational Services, and Mobile Advertising.

Breakdown of Mobile Segment (net of taxes and deductions):

Mobile Service Revenue (MSR) totaled R$ 4,286 million, up by 8.6% YoY, mainly due to the Mobile ARPU (Average Monthly Revenue Per User), up by 7.6% YoY and reached R$ 27.4, reflecting the success of the Company’s strategy to monetize its customer base through migrations to higher-value plans and offer differentiation.

Breaking down the performance of each mobile segment in 1Q22:

Interconnection Revenue (ITX) fell by 17.4% YoY, with lower incoming traffic. It should be noted that this was one of the most benefited lines by the COVID-19 pandemic. MTR’s effect on Net Service Revenue was 2.0%.

Customer Platform Revenue totaled R$ 35 million in 1Q22, with R$ 24 million from Financial Services and R$ 11 million from Mobile Advertising. Educational Services continue to focus heavily on expanding the user base, so they still do not have significant revenue.

^[1] Prepaid ARPU excludes Other Mobile Revenue and Customer Platform.

^[2] Human Postpaid ARPU excludes Other Mobile Revenue and Customer Platform.

Other Revenues grew 23.1% YoY in 1Q22, mainly due to the higher revenue from network sharing and swap contracts, in line with the Company’s strategy to expand the fiber transport infrastructure (backbone and backhaul), allocating resources (Capex and Opex) more efficiently.

Fixed Segment Breakdown (net of taxes and deductions):

Fixed Service Revenue totaled R$ 297 million this quarter, up by 5.7% over 1Q21. TIM Live continues as this performance’s main driver, up by 10.2% YoY, representing over 64% of the fixed service revenue.

TIM Live’s main growth factor was FTTH’s expansion. Following the focus on quality, we have been replacing copper networks for fiber ones, improving the customer experience. Thus, our FTTH customer base grew by 31.4% YoY in the first quarter of this year. We also launched TIM Live’s coverage in Joinville in February, marking the return of Live’s expansion to new cities after concluding the deal to sell I-Systems (formerly FiberCo) share control to IHS.

OPERATING COSTS AND EXPENSES

* Operating Costs normalized by: payroll expenses related to the acquisition of Oi’s mobile assets (+R$ 11.8 million in 1Q22), expenses with specialized legal and administrative services (+R$ 8.4 million in 1Q22 and +R$ 34.8 million in 4Q21), sale of the control over the investment in the company I-Systems (-R$ 782.2 million in 4Q21) and expenses with consulting firm for the acquisition project of Oi’s mobile assets (+R$ 4.3 million in 4Q21).

Reported Operating Costs and Expenses totaled R$ 2,624 million in 1Q22 (+13.1% YoY). In the quarter, this line was affected by the following non-recurring items: (i) payroll expenses totaling R$ 11.8 million, related to the acquisition of Oi’s mobile assets; and (ii) expenses with specialized administrative and legal services, totaling R$ 8.4 million, associated to the acquisition/restructuring projects of Oi’s and I-Systems’^[3] assets.

^[4][5]

^[3] I-Systems was created in partnership with IHS Brasil in November 2021 as an open provider of optic-fiber infrastructure. The transaction included the selling of 51% stake to the new partner through the payment of R$ 1.1 billion to TIM and the allocation of R$ 600 million into I-Systems' cash.

^[4] 12-month accumulated IPCA as of March 2022 (Source: IBGE).

^[5] 12-month accumulated IGP-M as of March 2022 (Source: FGV).

Breakdown of Normalized Costs and Expenses Performance:

Personnel Costs^[6] grew by 8.9% YoY in 1Q22. This performance was affected by: (i) readjustments on wages, benefits, and incentives at a level close to annual inflation of the period; and (ii) higher provisions related to employees’ bonuses.

Commercialization and Advertising remained nearly stable year-on-year, with a small 0.2% growth YoY in the quarter, affected by the net result from (i) reducing advertising expenses; (ii) in contrast to higher expenses with sales commissions, explained by the addition of new customers and a better intra-segment migration mix. The result is also affected by lower expenses with Fistel and lower expenses related to the management of the customer base (billing, collection and caring) through the Company’s continuous efforts on the digitalization processes.

Network and Interconnection grew by 24.1% YoY in 1Q22, mainly affected by: (i) higher expenses from the leasing of fiber-optic secondary network from the newly created I-Systems; (ii) higher expenses on infrastructure sharing contracts; (iii) inflationary readjustment in part of the contracts.

General and Administrative (G&A)^[7] expenses were up by 18.1% YoY in the quarter. This increase is mainly from: (i) hiring specialized services from consulting firms for recurring projects; and (ii) higher expenses related to the project, which started in 1Q21, to migrate the IT infrastructure to the cloud (“Journey to Cloud”). The project continues at a fast pace, and, in this quarter, TIM became Brazil’s first telco to migrate 100% of its data centers to the cloud, bringing more operational efficiency and improving the customer experience.

Cost of Goods Sold (COGS) grew by 29.0% YoY in 1Q22, following the Products Revenue growth due to higher handset prices.

Provisions for Doubtful Accounts (Bad Debt) grew by 10.5% YoY in 1Q22, totaling R$ 136 million, explained by a higher postpaid customer base and partially due to the more challenging macroeconomic scenario. Despite this growth, the Bad Debt over Gross Revenue ratio remained nearly stable year-over-year, at 2.1% in 1Q22 vs. 2.0% in 1Q21.

^[6] Personnel had a positive non-recurring impact of R$ 11.8 million in 1Q22, from payroll expenses related to the acquisition of Oi’s mobile assets.

^[7] General and Administrative Expenses had a positive non-recurring impact of R$ 8.4 million in 1Q22, related to expenses with specialized legal and administrative services associated to the acquisition/restructuring projects of Oi’s and I-Systems’ assets.

Other Operating Expenses (Revenues) fell by 1.5% YoY in 1Q22, mainly explained by lower expenses related to losses on civil lawsuits and a lower level of FUST/FUNTTEL expenses. This item corresponded to 2.7% of the normalized total Costs and Expenses (vs. 3.0% in 1Q21).

Subscriber Acquisition Costs (SAC = subsidy + commissioning + advertising expenses) totaled R$ 67.8 per gross addition in 1Q22, up by 30.1% YoY, mainly due to higher commission expenses generated by: (i) positive net additions in the Postpaid segment; and (ii) the migration of customers to higher-value segments.

The SAC/ARPU ratio (payback per client) grew YoY, reaching 2.5 months from 2.0 months in 1Q21.

FROM EBITDA TO NET INCOME

* EBITDA normalized according to the items described in the Costs section (+R$ 20.3 million in 1Q22 and -R$ 743.1 million in 4Q21). Net Income normalized by: tax credit and other effects (-R$ 6.9 million in 1Q22 and -R$ 13.3 million in 4Q21) and impact from deferred and current taxes over the revenue generated through the I-Systems transaction (+R$ 509.2 million in 4Q21).

EBITDA^[8] (Earnings before Interest, Taxes, Depreciation and Amortization)

Excluding the effects associated to the I-Systems operation, 1Q22 Normalized EBITDA totaled R$ 2,198 million, up by 8.8% YoY.

Excluding leases effects from these indicators, 1Q22 Normalized EBITDA-AL (“After Lease”) totaled R$ 1,576 million, +1.1% YoY.

^[8] EBITDA normalized according to items in the “Operating Costs and Expenses” section.

DEPRECIATION AND AMORTIZATION (D&A) / EBIT

D&A fell by 2.0% YoY in 1Q22 explained by a lower Depreciation of network infrastructure and 3G transmission and commutation equipment, in addition to lower software amortization. Normalized EBIT grew by 20.7% YoY in 1Q22, reflecting the solid EBITDA growth amid a lower D&A.

NET FINANCIAL RESULTS

In 1Q22, Net Financial Result was negative by R$ 248 million, down by around R$ 23 million in comparison to the 1Q21. This difference is mainly explained by the net result between:

INCOME TAX AND SOCIAL CONTRIBUTION

In 1Q22, the Reported Income Tax (“IR”) and Social Contribution (“CSLL”) totaled -R$ 42 million compared to -R$ 90 million in 1Q21. This improvement is mainly explained by a comparative basis benefited by IoE’s declaration in 1Q22. The line had a non-recurring impact totaling R$ 6.9 million in the quarter, as explained under the Costs section. In the Normalized view, IR/CSLL totaled -R$ 48 million in 1Q22 compared to -R$ 90 million in the same period of 2021 – improvement explained by the same reasons mentioned above. In the Normalized view, the effective rate was -10.4% in 1Q22 vs. -24.6% in 1Q21.

NET INCOME^[9]

^[9] Net Income normalized according to items in the “From EBITDA to Net Income” section.

CASH FLOW, DEBT AND CAPEX

* EBITDA normalized according to the items described in the Costs section (+R$ 20.3 million in 1Q22 and -R$ 743.1 million in 4Q21). Normalized Capex excludes the impacts related to the acquisition of the frequency auction licenses (R$ 3,585 million in 4Q21).

^[10]

In 1Q22, Normalized EBITDA-Capex was R$ 795 million, up by 14.2% YoY, taking Normalized EBITDA-Capex on Net Revenue to 16.8%. Excluding leasings, Normalized EBITDA-AL-Capex totaled R$ 248 million (+5.3% YoY).

CAPEX

* Normalized Capex excludes the impacts related to the acquisition of the frequency auction licenses (R$ 3,585 million in 4Q21).

At the end of this first quarter, the total Capex result was R$ 1,328 million, stable when compared to the same period of the previous year. In addition, Normalized Capex over Net Revenue was 28.1%, showing a reduction of -2.4 p.p. vs. 1Q21.

^[10] Operating Free Cash Flow with Normalized EBITDA and Capex as indicated in their respective sections.

WORKING CAPITAL VARIATION

In this quarter, the Working Capital Variation was negative by R$ 1,219 million, mainly due to EAF’s first installment payment, at around R$ 1.1 billion, as part of the obligations of 3.5 GHz license, purchased in the 5G frequencies auction, as previously mentioned in Cash Flow section. In March, the Company also disbursed R$ 298 million to Condecine and CRFP, which make up the Fistel tax with TFF.

The 2022 TFF payment is suspended, as well as those of 2020 and 2021, without a defined payment date (Note 21 of the Financial Statements), thus benefiting the Working Capital dynamics.

DEBT AND CASH

Debt Profile

In 1Q22, Normalized Debt (post-hedge) totaled R$ 13,964 million, up by R$ 3,729 million YoY. The total includes:

^[11] The derivatives position is also composed of the subscription bonus in the capital of C6 Bank, in the amount of R$ 499 million, as per Note 36 of the Financial Statement.

The financing (post-hedge) totaled R$ 3,339 million at the end of December. The average cost of debt, excluding leases and licenses, was 11.4% p.y. (108.5% of CDI) in the quarter, up when compared to 2.8% p.y. (130.4% of CDI) in 1Q21, affected by the higher CDI in the period.

At the end of the quarter, Cash and Securities positions totaled R$ 8,076 million, down by R$ 1,730 million YoY, affected by the items mentioned previously at Cash Flow section.

The average financial yield reached 11.2% p.y. in 1Q22, up by 8.9 p.p. compared to 1Q21, due to the latest increases in the basic interest rate and a better allocation of resources.

Quarterly Events and Subsequent Events

CLOSING OF THE PURCHASE OF OI'S MOBILE OPERATION ASSETS

On April 20, 2022, TIM jointly to Telefônica Brasil S.A. and Claro S.A., after complying with the previous conditions established by Cade and by Anatel, announced the conclusion of the acquisition process of Oi Móvel S.A.’s (“Oi Móvel”) mobile operation assets. With the conclusion of the transaction, TIM now holds 100% of the share capital of Cozani RJ Infraestrutura e Rede de Telecomunicações S.A., company that corresponds to part of the assets, rights and obligations unit of Oi Móvel acquired by the Company. For more details regarding the process conclusion, access the Material Fact.

PAYMENT OF INTEREST ON SHAREHOLDERS’ EQUITY

On March 22, 2022, TIM S.A. announced that its Board of Directors approved the distribution of R$ 195 million as Interest on Shareholders’ Equity (“IoE”). The payment was made on April 27, 2022, and the date of March 28, 2022, was used to identify the shareholders entitled to receive such payment. Thus, the shares acquired after that date were ex-Interest on Shareholders’ Equity rights.

TIM OBTAINS RIGHT TO EXERCISE THE 5^TH AND 6^TH TRANCHES OF SUBSCRIPTION BONUSES AT BANK C6

In January and April 2022, TIM obtained the right to exercise the 5^th and 6^th tranches, respectively, of the subscription bonus of C6's share capital as a result of the achievement of the 5^th and 6^th levels of the agreed targets within the partnership, which result in an accumulated interest of around 4.8% in C6’s share capital.

Operating and Marketing Performance

MOBILE SEGMENT:

GENERAL MARKET

The mobile market grew by 7.5% YoY at the end of March 2022, reinforcing the customer base positive advance in the last quarter. In the past 12 months, Postpaid net additions reached 14.4 million users, 58% of it from human postpaid lines. Prepaid reached 3.6 million new lines.

TIM

TIM ended the 1Q22 totaling 52.3 million lines, up by 1.1% YoY in the period.

In 1Q22, the Postpaid base reported 23.2 million lines (+4.5% YoY). The segment mix represents 44% over the total customer base, +1.4 p.p. YoY. The net additions of the last 12 months accumulated a positive result of 996 thousand new lines. The Postpaid monthly disconnection rate remains low (1.5% in 1Q22). Human Postpaid (ex-M2M) reached 19.2 million lines (+5.2% YoY) at the end of the quarter, with net additions of 953 thousand lines in the last 12 months. M2M base reached 4.0 million lines in 1Q22, up by 1.1% YoY.

In 1Q22, the Prepaid base had 29.1 million lines, which fell by 1.4% YoY. The base accumulated 420 thousand disconnections in the last 12 months. The segment is the most impacted by the economy’s deterioration, mainly in the last 2 years.

The 4G base ended the quarter with 46.9 million lines, maintaining a good growth pace (+6.6% YoY).

The 5G DSS base ended the 1Q22 with 366 thousand lines, up by 15.5% QoQ.

FIXED SEGMENT:

TIM Live reached a base of 689 thousand connections in 1Q22, preserving the growth pace (+4.2% YoY). The service’s net additions reached around 4.5 thousand new lines in the period, with the FTTH base as the main driver. Higher-value plans, with speed above 100 Mpbs, continue to gain more relevance, reaching a 65% share of the total base by the end of March.

Customer Platform and Mobile Advertising

Since 2020, TIM has been developing strategies to expand and diversify the Company’s revenue sources, including the Customer Platform, which aims to monetize the Company’s customer base by observing market trends and innovative partnerships. This initiative is made possible by two business models:

Within this strategy, some verticals were ranked as great opportunities for having a more direct connection with mobile services and for having a higher valuation than telecom companies. Below are details of the verticals in which we are already operating.

TIM ADS AND TIM INSIGHTS

With more than 500 datapoints per user, TIM Insights has proven to be a powerful tool to identify the clusters concerned on digital services in various industries, such as Financial Services, Education, Social Networks, Food & Beverage, Retail, Consumer Goods, etc.

With more than 30 million customers with OptIns, TIM Ads provides advertising awareness and performance in several forms such as text, image, gif and, mainly, video in TIM's traditional channels, as well as in applications such as Meu TIM, TIM +Vantagens, TIM Fun and TIM News. In addition, it works as a platform for app installing, generating qualified leads, consumer surveys, 1st party data enrichment and brand lift measurement.

In this first quarter, advertising and data intelligence revenues reached the highest level ever recorded since the beginning of the initiative, around R$ 11 million, up by 87% YoY. In addition, we had more than 5 million TIM users engaged in our advertising campaigns.

FINANCIAL SERVICES

In March 2020, the Company concluded the negotiation with C6 and, as of April 2020, launched exclusive offers for TIM customers who opened C6’s bank accounts and used its services. As compensation in this contract, TIM gets a commission per activated account and the option to obtain an interest in the bank as we reach active account targets. The percentage of shares received for each target achieved varies throughout the contract, with the initial slots being more advantageous for TIM due to the greater effort required to take off a new digital company.

The partnership with C6 closed 1Q22 with another record of active accounts, with over three million active users since the beginning of the partnership, with a 4.4% equity stake of the bank by the end of the quarter (in April, with the achievement of the 6^th tranche, the accumulated equity stake was 4.8%). In terms of revenues, the partnership generated R$ 24 million for TIM in the first quarter of 2022.

Even with the project success, due to differences between the partners, in 2021, an Arbitration Procedure was initiated, which remains open, as described in Note 27 of the Financial Statement.

DIGITAL EDUCATIONAL SERVICES

In July 2021, following the strategy adopted with C6, the Company concluded the negotiation with Anhanguera Educacional Participações S.A., a subsidiary of Cogna Educação S.A (“Cogna”), establishing a strategic partnership to develop offers with special benefits for distance learning through the Ampli platform.

Besides the partnership announced, the Company launched exclusive offers for customers enrolled in the platform’s courses, and TIM customers begin to get discounts on selected courses.

As in the partnership with C6, TIM is paid through a commission and interest in Ampli, which may reach up to 30% of its capital – the subscription of shares was approved by Cade in September 2021. It should also be noted that the calculation of subscription rights will take place annually.

At the end of this first quarter of 2022, the partnership reached over 68 thousand users enrolled in undergraduate, graduate and open courses. In 1Q22, we also reached over 1.6 million accesses on the partnership page.

Infrastructure

For another quarter, TIM reinforces its commitment to enhancing its services and continuously improving the quality, aiming to ensure the best user experience for its customers. The focus on expanding and improving its network infrastructure remains an essential pillar in our business plan.

Below are the evolution details of our mobile and fixed networks:

* Includes the following locations: Rio de Janeiro (RJ), São Gonçalo (RJ), Nilópolis (RJ), Nova Iguaçu (RJ), São João do Meriti (RJ), Duque de Caxias (RJ), São Paulo (SP), Mauá (SP), Poá (SP), Suzano (SP), Francisco Morato (SP), Franco da Rocha (SP), Diadema (SP), Guarulhos (SP), Taboão da Serra (SP), Salvador (BA), Lauro de Freitas (BA), Camaçari (BA), Feira de Santana (BA), Recife (PE), Olinda (PE), Jaboatão dos Guararapes (PE), Paulista (PE), Goiânia (GO), Aparecida de Goiânia (GO), Anápolis (GO), Manaus (AM), Belo Horizonte (MG), Betim (MG), Contagem (MG), Joinville (SC), Taguatinga (DF), Samambaia (DF), Ceilândia (DF), Águas Claras (DF), Guará (DF), Candangolândia (DF) and Gama (DF).

Environmental, Social & Governance

1^ST QUARTER 2022 ESG HIGHLIGHTS

For TIM Group, the business role is increasingly tied to the responsible management of aspects that go beyond the financial targets and could also generate a positive value for society in a long term. For this reason, its ESG’s ambitions are connected to the Company's materiality matrix and the UN Sustainable Development Goals.

Driven by the aspiration to "be an ESG reference in Brazil", TIM has updated its ESG Plan 2022-24, with environmental, social, and governance goals and commitments:

* Base year 2019

** Reduce by 50% customer complaints at Anatel in the personal mobile service by 2023, with respect to 2019, without considering complaints from customers coming from Oi Móvel's base.

ENVIRONMENTAL

SOCIAL

GOVERNANCE

To access the ESG quarterly report, please go to: ESG Quarterly Report

Disclaimer

The consolidated financial and operating information disclosed in this document, except where otherwise indicated, is presented in accordance with the International Financial Reporting Standards (IFRS) and in Brazilian Reais (R$), in compliance with the Brazilian Corporate Law (Law 6,404/76). Comparisons refer to the first quarter of 2022 (“1Q22”), except when otherwise indicated.

This document may contain forward-looking statements. Such statements are not statements of historical fact and reflect the beliefs and expectations of the Company's management. The words “anticipates”, “believes”, “estimates”, “expects”, “forecasts”, “plans”, “predicts”, “projects”, “targets” and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties foreseen, or not, by the Company. Therefore, the Company’s future operating results may differ from current expectations and readers of this report should not base their assumptions exclusively on the information given herein. Forward-looking statements only reflect opinions on the date on which they are made and the Company is not obliged to update them in light of new information or future developments.

Attachments

Attachment 1: Operational Indicators

Attachment 1

TIM S.A.

Operational Indicators

Corporate structure

TIM S.A. (“TIM” “Company” and/or “Enterprise”) is a public limited company with Registered office in the city of Rio de Janeiro, RJ, and a subsidiary of TIM Brasil Serviços e Participações S.A. (“TIM Brasil”). TIM Brasil is a subsidiary of the Telecom Italia Group that held 66.59% of the share capital of TIM S.A on March 31, 2022 (66.59% on December 31, 2021).

The Company provides Landline Switched Telephone Service (”STFC“) in Local, National Long-Distance and International Long-Distance modes, as well as Personal Mobile Service (”SMP“) and Multimedia Communication Service (”SCM"), in all Brazilian states and in the Federal District.

The Company's shares are traded on B3 (formerly BM&F/Bovespa). Additionally, TIM S.A. has American Depositary Receipts (ADRs), Level II, traded on the New York Stock Exchange (NYSE) – USA. As a result, the company is subject to the rules of the Securities and Exchange Commission (“CVM”) and the Securities and Exchange Commission (“SEC”). In order to comply with good market practices, the company adopts as a principle the simultaneous disclosure of its financial information in both markets, in reais, in Portuguese and English.

In December 2020, TIM’s Board of Directors, after analyzing the studies prepared and the non-binding proposals received, approved, in a meeting held on December 10, 2020, the incorporation of a company, as preparation for future segregation of assets and provision of infrastructure services for residential fiber optic of TIM S.A., called FiberCo Soluções de Infraestrutura Ltda.

On May 5, 2021, TIM S.A. informed its shareholders and the market in general that, at a meeting of the Company’s Board of Directors held on the same day, an agreement between TIM S.A. and IHS Fiber Brasil - Cessão of Infrastructures Ltd. (“IHS”) was approved for the acquisition, by IHS, of an equity interest in FiberCo Soluções de Infraestrutura S.A. (“FiberCo”).

The process for acquisition of equity interest at FiberCo, later named I–Systems, by IHS was completed on November 16, 2021. As a result, IHS currently holds 51% of the share capital of I-Systems, with TIM S.A. having a minority (non-controlling) interest of 49% in I-Systems.

The details of the sale of FiberCo’s equity interest are described below.

Corporate Reorganization

Sale of 51% of I-Systems (formerly FiberCo) to IHS

On May 5, 2021, the Company disclosed the decision of its Board of Directors on the sale by TIM of 51% of the share capital of FiberCo to IHS, with the remaining 49% remaining under the control of the Company upon closing of the transaction.

FiberCo was established by the Company to segregate network assets and provide infrastructure services. FiberCo was born to implement, operate and maintain last-mile infrastructure for broadband access to be offered in the wholesale market. Nevertheless, the terms of the agreement define TIM as current main customer, having the prerogative of 6 months of exclusivity after entering new areas.

In November 2021, as a result of the spin-off of net assets from the broadband business and with the subsequent disposal of 51% of its equity interest on behalf of IHS, TIM S.A. ceased the line by line consolidation of I-Systems (former FiberCo) and recorded an investment in the amount of R$ 1,612,957, at fair value, for the remaining minority interest (non-controlling) of 49%.

Currently, due to the closing of the transaction and loss of I- Systems’s (former FiberCo) control, TIM S.A. wrote-off about 90% of the total goodwill recorded in the acquisition of TIM Fiber SP Ltda. and TIM Fiber RJ S.A. in the amount of R$ 1,051,477.

According to the valuation report of the net assets and liabilities, the calculated amount of R$ 1,211,789 was paid-in as share capital of I-Systems on November 1, 2021.

The process of selling the 51% equity interest in the new company, I-Systems, to IHS was completed on November 16, 2021. For the conclusion of the sale, IHS made a capital contribution of R$ 582,498 (primary) in the new company (I-Systems) and the payment of R$ 1,096,294 (secondary) directly to TIM S.A., thus totaling R$ 1,678,792 for the acquisition of a 51% equity interest. The fair value calculated for 100% of the new company was R$ 3,291,794.

Upon closing, the interest in the investee was recorded at fair value as provided for by IFRS 10 (CPC 36), and evaluated by the equity method subsequently, as defined in IAS 28 (CPC 18).

As provided for in IAS 28 (CPC 18), the sale of an investment with loss of control must be recognized by the total write-off of the investment and recognition of part of the associated company’s investment at fair value.

The effects of the transaction are detailed below:

As a result of the operations described above, the Company does not present consolidated statements of income as of March 31, 2022.

The individual and consolidated quarterly information was prepared in accordance with accounting practices adopted in Brazil, which comprise the resolutions issued by the CVM and the pronouncements, guidelines and interpretations issued by Comitê de Pronunciamentos Contábeis [Accounting pronouncements committee] (CPC) and the International Financial Reporting Standards (International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and show all relevant information specific to the quarterly information, and only this information, which is consistent with that used by management in its management. Additionally, the Company considered the guidelines provided for in Technical Guideline OCPC 07 - Evidencing upon Disclosure of General Purpose Financial-Accounting Reports in the preparation of its quarterly information. In this way, the relevant information specific to the quarterly information is being evidenced and correspond to those used by the management in its duties.

The main accounting policies applied in the preparation of this quarterly information are defined below and / or presented in their respective notes. Those policies were consistently applied in the years presented.

a. General criteria for preparation and disclosure

The individual and consolidated quarterly information was prepared considering the historical cost as value basis and financial assets and liabilities (including derivative financial instruments) measured at fair value.

Assets and liabilities are classified according to their degree of liquidity and collectability. They are reported as current when they are likely to be realized or settled over the next 12 months. Otherwise, they are recorded as non-current. The exception to this procedure involves deferred income tax and social contribution balances (assets and liabilities) and provision for lawsuits and administrative proceedings that are fully classified as long-term.

The presentation of the Statement of Value Added is required by Brazilian corporate law and the accounting practices adopted in Brazil applicable to publicly held companies. The DVA was prepared according to the criteria set forth in CPC Technical Pronouncement No. 09 - “Statement of Value Added”. IFRS does not require the presentation of this statement. As a consequence, according to the IFRS, this statement is presented as supplementary information, without affecting the quarterly information.

Interests paid are classified as financing cash flow in the statement of cash flows as it represents costs of obtaining financial resources.

b. Functional currency and presentation currency

The currency of presentation of the quarterly information is the Real (R$), which is also the Company´s functional currency.

Foreign currency transactions are recognized at the exchange rate on the date of the transaction. Monetary items in foreign currency are converted into reais at the exchange rate on the balance sheet date, informed by Banco Central do Brasil [Central Bank of Brazil]. Foreign exchange gains and losses linked to these items are recorded in the statement of income.

Operating segments are components of the entity that carry out business activities from which revenues can be obtained and expenses incurred. Its operating results are regularly reviewed by the entity's main operations manager, who makes decisions on resource allocation and evaluates segment performance. For the segment to exist, individualized financial information is required.

The main operational decision maker in the Company, responsible for the allocation of resources and periodically evaluating performance, is the Executive Board, which, along with the Board of Directors, are responsible for making the strategic decisions of the company and its management.

The Group’s strategy is focused on optimizing results, and from the corporate reorganization mentioned in note 1, all the operating activities of the group are concentrated exclusively in TIM S.A. Although there are diverse activities, decision makers understand that the company represents only one business segment and do not contemplate specific strategies focused only on one service line. All decisions regarding strategic, financial planning, purchases, investments and investment of resources are made on a consolidated basis. The aim is to maximize the consolidated result obtained by operating the SMP, STFC and SCM licenses.

Subsidiaries are all the entities in which the Group retains control. The Group controls an entity when it is exposed to, or has a right over the variable returns arising from its involvement with the entity and has the ability to interfere in those returns due to its power over the entity. The subsidiaries are fully consolidated as of the date control is transferred to the Group. Consolidation is interrupted beginning as of the date in which the Group no longer holds control.

The purchase accounting method is used to record the acquisition of subsidiaries by the Group. The acquisition cost is measured as the fair value of the assets acquired, equity instruments (i.e.: shares) and liabilities incurred or assumed by the acquirer on the date of the change of control. Identifiable assets acquired, contingencies and liabilities assumed in a business combination are initially measured at fair value on the date of acquisition, regardless of the proportion of any minority interest. The portion exceeding the acquisition cost of the Group's interest in the acquired identifiable net assets, is recorded as goodwill. Should the acquisition cost be less than the fair value of the net assets of the acquired subsidiary, the difference is recognized directly in the statement of income as a revenue once concepts and calculations applied are reviewed.

Intercompany transactions, as well as the balances and unrealized gains and losses in those transactions, are eliminated. The base date of the financial information used for consolidation purposes is the same for all the companies in the Group.

There are no consolidated balances for the balance sheet for March 2022 and December 2021, since the subsidiary I-Systems (formerly FiberCo) was incorporated in December 2020 and, as described in Note 1, had 51% of its equity interest sold to IHS, and TIM S.A. now holds a non-controlling minority interest of 49%. At that moment, TIM S.A. started having I-Systems as an affiliated company and to record the income (loss) of this company under the equity method, no longer consolidating it.

This quarterly information was approved by the Company's Board of Directors on May 3, 2022.

The following new standards/amendments were issued by the Accounting Pronouncement Committee (CPC) and International Accounting Standards Board (IASB), are effective for the period ended March 31, 2022.

·        Amendments to CPC 06 (R2), CPC 11, CPC 38, CPC 40 (R1) and CPC 48: Benchmark Interest Rate Reform

The amendments to Pronouncements CPC 38 and CPC 48 provide for temporary exceptions that address the financial statement effects when a rate of interbank deposit certificate is replaced with an alternative to an almost risk-free rate. The amendments include the following practical expedients:

·        A practical expedient that requires contractual changes, or changes in cash flows which are directly required by the reform, to be treated as changes in a floating interest rate, equivalent to a change in a market rate;

·        A practical expedient that allows changes required by the reform, to be carried out in hedge designation and documentation and hedge relationship will not be discontinued;

·        A practical expedient that provides a temporary exception to entities so they will comply with the separately identifiable requirement when a risk-free rate instrument is designated as an hedge risk component.

These amendments did not impact the Group’s quarterly and consolidated information.

If they become applicable, the group intends to use the practical expedients in future periods.

·        Amendments to CPC 06 (R2): COVID-19 related benefits granted to leaseholders in lease agreements that go beyond June 30, 2021.

The amendments provide for the granting of benefits to lessees upon adoption of the guidelines of CPC 06 (R2) on the modification of the lease agreement, when accounting for the related benefits as a direct consequence of the Covid-19 pandemic. As a practical expedient, a lessee may choose not to assess whether a benefit related to Covid-19 granted by the lessor is a modification of the lease agreement. The lessee who makes this option must account for any change in the lease payment resulting from the benefit granted in the lease agreement related to Covid-19 in the same way that it would account for the change by adopting CPC 06 (R2) if the change was not a modification of the lease agreement.

The amendment was intended to be applied until June 30, 2021, but as the impact of Covid-19 pandemic may continue, on March 31, 2021, the CPC extended the application period of this practical expedient to June 30, 2022. This amendment becomes effective for the fiscal years beginning on or after January 1, 2021. However, the Group has not yet received COVID-19 benefits granted to lessees, but the application of practical expedient is planned to be applied once it is available within the standard period.

The following new standards were issued by Comitê de Pronunciamentos Contábeis [Accounting pronouncements committee] (CPC) and the International Accounting Standards Board (IASB), but are not in effect for the period ended on March 31, 2022.

In May 2017, the IASB issued IFRS 17 - Insurance Contracts (a standard not yet issued by CPC in Brazil, but which will be codified as CPC 50 - Insurance Contracts and will replace CPC 11 - Insurance Contracts), a new comprehensive accounting standard for insurance contracts that includes recognition and measurement, presentation and disclosure. As soon as it comes into force, IFRS 17 (CPC 50) will replace IFRS 4 - Insurance Contracts (CPC 11), issued in 2005. IFRS 17 applies to all types of insurance contracts (such as life, non-life, direct insurance and reinsurance), regardless of the type of entity that issues them, as well as certain guarantees and financial instruments with discretionary participation characteristics. Some scope exceptions apply. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements of IFRS 4, which are largely based on local accounting policies in force in previous periods, IFRS 17 provides for a comprehensive model for insurance contracts, covering all relevant accounting aspects. The focus of IFRS 17 is the general model, covering the following:

• A specific adaptation for contracts with direct participation characteristics (variable rate approach).

• A simplified approach (premium allocation approach), mainly for short-term contracts. IFRS 17 is effective for periods beginning on or after January 1, 2023, requiring the presentation of comparative amounts. Early adoption is allowed if the entity also adopts IFRS 9 and IFRS 15 on the same date or before the first-time adoption of IFRS 17.

This standard does not apply to the Company.

·        Amendments to IAS 1: Classification of liabilities as current or non-current

In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1, related to CPC 26, aiming to specify the requirements for classifying the liabilities as current or non-current. The amendments clarify the following:

• What a right to postpone settlement means;

• That the right to postpone settlement must exist on the base date of the report;

• That this classification is not affected by the likelihood that an entity will exercise its right to postpone settlement;

• That only if a derivative embedded in a convertible liability is itself an equity instrument would the terms of a liability not affect its classification. Amendments are valid for periods started on January 1, 2023 and must be applied on a retrospective basis.

The Company is currently assessing the impact that the changes will have on current practice and whether or not existing loan agreements will require renegotiation.

·        Amendments to IAS 8: Definition of accounting estimates

In February 2021, IASB issued amendments to IAS 8 (standard related to CPC 23), in which the definition of ‘accounting estimates’ is introduced. The amendments clarify the difference between changes in accounting estimates and changes in accounting policies and correction of errors. Additionally, they clarify how entities use measurement and input techniques to develop accounting estimates.

The amendments will become effective for periods beginning on or after January 1, 2023 and will be applied to changes in accounting policies and estimates that occur on or after the beginning of that period. If disclosed, early adoption is allowed.

Amendments are not expected to have a significant impact on the Group’s financial statements.

·        Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of accounting policies

In February 2021, IASB issued amendments to IAS 1 (standard related to CPC 26 (R1)) and IFRS Practice Statement 2 Making Materiality Judgments, in which guides and examples are provided to help entities to apply materiality judgment to the disclosure of accounting policies. The aim of amendments is to assist entities in the disclosure of accounting policies that are most useful by replacing the requirement for disclosure of significant accounting policies to material accounting policies and adding guides about how entities should apply the concept of materiality to make decisions about the disclosure of accounting policies.

The amendments to IAS 1 are applicable for periods started as of or after January 1, 2023, with early adoption allowed. Since the amendments to Practice Statement 2 provide non-mandatory guides about the application of material definition to the accounting policy information, an adoption date is not required for this amendment.

The Group is currently evaluating the impacts of these amendments to the accounting policies disclosed.

COVID-19 impacts

Since March 2020, a pandemic was declared by the World Health Organization due to the outbreak of the new Coronavirus 2019 (COVID-19). The main impacts and first cases were recorded in Brazil and in the world also in the first quarter of 2020.

The Company has a robust infrastructure and is part of an extremely important segment in this period of crisis, essential for the population, government and health system since 2020.  After an internal analysis, there was no indication of impairment of assets or risks associated with the fulfillment of obligations since the Company is not highly leveraged and still has credit lines available to be used in the event of a significant reduction in cash volume. 

In September 2021, the country showed a significant evolution in vaccination levels, with a reduction in the transmission rate and number of cases. Thus, there was a slight improvement in economic activities. In June, the stores returned with activities with a positive impact on device sales.

The country currently has vaccination levels at approximately 80% and we have not identified any relevant impacts in the quarterly information.

Accounting estimates and judgments are continuously assessed. They are based on the Company's historical experience and on other factors, such as expectations of future events, considering the circumstances present on the base date of quarterly information.

By definition, the resulting accounting estimates will rarely be the same as the actual results. The estimates and assumptions that present a significant risk, with the probability of causing a material adjustment to the carrying amounts of assets and liabilities for the fiscal period, are covered below.

(a)       Impairment loss on non-financial assets and investments in associated companies

Impairment losses occur when book value of an asset or cash generating unit exceeds its recoverable value, which is the highest of fair value less selling costs and value in use. Calculation of fair value less selling costs is based on information available on similar assets’ selling transactions or market prices less additional costs to dispose of the asset. The calculation of value in use is based on the discounted cash flow model.

Any reorganization activities with which the Company is not committed to on the reporting date of the quarterly information or significant future investments that could improve the asset base of the cash generating unit under test are excluded for impairment testing purposes.

The main non-financial assets for which this assessment was made are goodwill recorded by the Company (note 15) and its tangible and intangible assets.

Net investments in associated companies are valued after applying the equity method to determine whether there is any objective evidence of impairment. The recoverable amount of an investment in an associated company must be determined for each investment, unless the associated company does not generate cash inflows on an ongoing basis that are largely independent of those generated by the entity’s other assets. The investment in an associated company was valued as described in Note 13.

(b)       Income tax and social contribution (current and deferred)

Income tax and social contribution (current and deferred) are calculated according to interpretations of current legislation and CPC 32 / IAS 12. This process typically involves complex estimates to determine taxable income and temporary differences. In particular, the deferred assets on tax losses, negative basis of social contribution and temporary differences is recognized in proportion to the probability that future taxable income is available and can be used. The measurement of the recoverability of deferred income tax on tax losses, negative basis of social contribution and temporary differences takes the history of taxable income into account, as well as the estimate of future taxable income (Note 10).

(c)       Provision for legal and administrative proceedings

The legal and administrative proceedings are analyzed by the Management along with its legal advisors (internal and external). The Company considers factors in its analysis such as hierarchy of laws, precedents available, recent court judgments, their relevance in the legal system and payment history. These assessments involve Management’s judgment (note 24).

(d)       Fair value of derivatives and other financial instruments

The financial instruments presented in the balance sheet at fair value are measured using valuation techniques that consider observable data or observable data derived from market (Note 36).

(e)       Unbilled revenues

Since some cut dates for billing occur at intermediate dates within the months of the year, as the end of each month there are revenues earned by the Company, but not actually invoiced to its customers. These unbilled revenues are recorded based on estimate that takes into consideration historical consumption data, number of days elapsed since the last billing date, among others (note 27).

(f)       Leases

The Company has a significant number of the lease contracts in which it acts a lessee (note 16), and with the adoption of the accounting standard IFRS 16 / CPC 06 (R2) – Leases, on 01/01/2019, certain judgments were exercised by Company’s management in measuring lease liabilities and right-of-use assets, such as: (i) estimate of the lease term, considering non-cancellable period and the period covered by options to extend the contract term, when the exercise depends only from the Company, and this exercise is reasonably certain; and (ii) using certain assumptions to calculate the discount rate.

The company is not able to readily determine the interest rate implicit on the lease and, therefore, considers its incremental rate on loans to measure lease liabilities. Incremental rate on the lessee’s loan is the interest rate that the lessee would have to pay when borrowing, for a similar term and with a similar guarantee, the resources necessary to obtain the asset with a value similar to the right of use asset in a similar economic environment. The company estimates the incremental rate using observable data (such as market interest rates) when available and considers aspects that are specific to the Company (such as the cost of debt) in this estimate.

These are financial assets measured at amortized cost through the effective interest rate method.

The Company’s Management determines the classification of its financial assets upon initial recognition.

Bank certificates of deposit (“CDBs”) and committed transactions are nominative securities issued by banks and sold to the public as a form of fund raising. Such securities may be traded during the contracted term, at any time, without significant loss in their value and are used for the fulfilment of short-term obligations by the company.

The annual average return of the Company's applications related to CBD’s and Committed Operations is 101.87% (101.57% as of December 31, 2021) of the variation of the Interbank Deposit Certificate – CDI.

Comprise financial assets measured at fair value through profit or loss.

(i)As of December 2017, the Company, with the aim of using tax deductibility benefit for income tax and social contribution purposes, started investing in the National Film Industry Financing Fund (FUNCINE). The average remuneration in 2022 is 0.19% p.a. (-0.06% p.a. on December 31, 2021).

(ii) Fundo Soberano is composed only of federal government bonds. The average remuneration in 2022 is 104.76% (95.13% on December 31, 2021) of the variation of the interbank deposit certificate – CDI.

(iii) In August 2017, the Company invested in open FIC's (Quota Investment Fund). Funds are mostly made up of federal government bonds and papers from top-tier financial institutions. The average remuneration in 2022 of the FIC’s was 112.84% (122.76% on December 31, 2021) of the variation of the Interbank Deposit Certificate - CDI.

(iv) Government bonds are fixed income financial instruments issued by the National Treasury to finance the activities of the Federal Government.

(v) The CDB operations are emitted by the banks with the commitment of stock buyback by the bank itself and with predetermined taxes.

(vi) The Financial bills is a fix income tittle emitted by financial institutions with the objective of a long-term fund raising

(vii) Is represented by: Debentures, FIDC, commercial notes, promissory notes, bank credit note.

These are financial assets measured at amortized cost, and refer to accounts receivable from users of telecommunications services, from network use (interconnection) and from sales of handsets and accessories. Accounts receivable are recorded at the price charged at the time of the transaction. The balances of accounts receivable also include services provided and not billed (“unbilled”) up to the balance sheet date. Accounts receivable from clients are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method less the provision for expected credit losses ("impairment").

The provision for expected credit losses was recognized as a reduction in accounts receivable based on the profile of the subscriber portfolio, the aging of overdue accounts receivable, the economic situation, the risks involved in each case and the collection curve, at an amount deemed sufficient by Management, as adjusted to reflect current and prospective information on macroeconomic factors that affect the customers’ ability to settle the receivables.

The fair value of trade accounts receivable is close to the book value recorded on March 31, 2022 and December 31, 2021.

The average rate considered in calculating the present value of accounts receivable recorded in the long term is 0.51% (0.19% on December 31, 2021).

The movement of the provision for loss on expected settlement credits, accounted for as an asset reduction account, was as follows:

The aging of accounts receivable is as follows:

Inventories are presented at the average acquisition cost. A loss is recognized to adjust the cost of Handsets and accessories to the net realizable value (selling price) when this value is less than the average acquisition cost.

(i) The amounts of recoverable ICMS (state VAT) are mainly comprised by:

(i) credits on the acquisition of property, plant and equipment directly related to the provision of telecommunication services (credits divided over 48 months).

(ii) ICMS amounts paid under the tax substitution regime from goods acquired for resale, mainly mobile handsets, chips, tablets and modems sold by TIM.

(i) Income tax and social contribution amounts are related to other income tax and social contribution credits from previous years. The estimated period for using a substantial part of the credits is more than 12 months later.

In September 2021, the Federal Supreme Court (STF), with general repercussions, established an understanding for the non-levy of Corporate Income Tax (IRPJ) and Social Contribution (CSLL) on the monetary restatement using the SELIC rate in cases of undue payment. Although the aforementioned decision is still pending publication, as well as the specific TIM lawsuit is still pending judgment, TIM recorded its best estimate to date, in the amount of R$ 558 million (R$ 547 million on December 31, 2021) since the likelihood of a favorable outcome for the Company becomes probable.

(ii) The Recoverable PIS/COFINS amounts mainly refer to credits from a legal proceeding filed by TIM Celular S.A. (ultimately merged into TIM S.A., as well as TIM S.A. itself), with a favorable final decision in Higher Courts which discussed the exclusion of the ICMS from the PIS and COFINS calculation bases. According to the Company’s internal assessment, the Company expects to use these credits in the next 12 months.

In March 2017, the Federal Supreme Court (“STF”) recognized the unconstitutionality of including ICMS amounts in the calculation base of PIS and COFINS contributions.  TIM S.A. (previously named “Intelig Telecomunicações Ltda.”), as the surviving company from the merger of TIM Celular S.A. and other entities existing in the Group in the past, which had filed proceedings of the same nature, has been challenging this issue in court since 2006, with effects retroactive to five years, as permitted by the legislation. The total amount recorded in 2019 related to these credits was R$ 3,023 million, of which R$ 1,795 million relates to principal and R$ 1,228 million was inflation adjustment.

The amount recorded are updated monthly at the interest rate equivalent to the reference rate of the Special Settlement and Custody System (Selic), available on the website of the Brazilian Federal Revenue.

In 2021, TIM had utilized credits arising from the process of exclusion of ICMS from the calculation bases of PIS and COFINS, for payments of federal taxes, in the total amount of R$ 957 million. In 2022, total offsetting of R$ 340 million was made for said PIS and COFINS credits.

In May 2021, the Brazilian Supreme Court (STF) ended the discussion regarding the credit rights of the companies, defining in the judgment of Motions for Clarification that the exclusion of ICMS from the PIS and COFINS calculation basis is valid as of March 15, 2017, when the general repercussion thesis (Topic 69) was established, in the judgment of Special Appeal (RE) No. 574706.

Considering that the judges ratified that the ICMS not included in the PIS/COFINS calculation basis is highlighted in the invoice, we confirm that the procedures adopted by TIM S.A., when providing for PIS/COFINS credits, are adequate.

Deferred income tax and social contribution are recognized on: (1) accumulated income tax carried forward losses and negative basis of social contribution, and (2) temporary differences arising from differences between the tax bases of assets and liabilities and their carrying values in the financial statements. Deferred income tax is determined using the tax rates (and tax laws) enacted, or substantially enacted, up to the balance sheet date. Subsequent changes in tax rates or tax legislation may modify the deferred tax credit and debit balances.

Deferred tax assets on income tax and social contribution are recognized only in the event of a profitable track record and/or when the annual forecasts prepared by the Company, examined by the Tax Council and Statutory Audit Committee and approved by other Management bodies, indicate the likelihood of the future realization of those tax credits.

The balances of deferred income tax assets and liabilities are presented at net value in balance sheet when there is the legal right and the intention of offsetting them upon calculation of current taxes, in general related to the same legal entity and the same tax authority. Thus, deferred tax assets and liabilities belonging to different entities are in general shown separately, not at their net amounts.

On March 31, 2022 and December 31, 2021, the prevailing tax rates were 25% for income tax and 9% for social contribution. In addition, there is no statute of limitation in regard to the income tax and social contribution carried forward losses, which it can be offset by up to 30% of the taxable profit reached at each fiscal year, according to the current tax legislation.

The amounts recorded are as follows:

(i) Mainly represented by the Fistel fee for the financial years 2020, 2021 and 2022. The Operating Inspection Fee (TFF) for the years 2020, 2021 and 2022 had its payments suspended by virtue of an injunction and, therefore, still do not have a specific date for payment. See note 21 for details.

(ii) Represented by the goodwill on the business combination of companies TIM Fiber RJ and SP acquired by TIM in 2012, partially realized in November 2021 once this transaction is completed.

(iii) As of the 1Q20, TIM S.A. excludes the portion of acceleration of depreciation of movable assets belonging to property, plant and equipment from the calculation basis of the IRPJ and CSLL, due to their uninterrupted use in three operating shifts, supported by technical expert report, as provided for in Article 323 of the RIR/2018, or by the adequacy to the tax depreciation provided for in IN 1700/2017. Such tax adjustment generated a deferred liability of R$ 512 million until March 31, 2022 (R$ 467 million up to December 31, 2021) and applied as of January 1, 2020.

(iv) Refers to deferred charges on the fair value of the non-majority interest calculated in the sale transaction described in Note 1 that took place in November 2021 between TIM S.A. and IHS Fiber Brasil - Cessão de Infraestruturas Ltda.

Expectation of recovery of tax credits

The estimates of recoverability of tax credits were calculated taking into consideration financial and business assumptions available on March 31, 2022.

Based on these projections, the company has the following expectation of recovery of credits:

The company based on a history of profitability and based on projections of future taxable results, constitutes deferred income tax credits and social contribution on all of its tax losses, negative social contribution basis and temporary differences.

The Company used credits from tax losses and the negative basis of social contribution in the amount of R$ 46,969 throughout this year up to March 31, 2022 (R$ 255,252 on December 31, 2021).

(i) The Fistel rate is appropriated monthly to the income (loss).

(ii) Represent prepaid payments of advertising expenses for products and services of the TIM brand that are recognized in the result according to the period of serving the advertisement.

(iii) It is substantially represented by incremental costs related to sales commissions paid to partners for obtaining customer contracts arising from the adoption of IFRS 15/ CPC 47, which are deferred to the result in accordance with the term of the contract and/or economic benefit, usually from 1 to 2 years.

(iv) They represent prepayments of IT services expenses for network migration of information to the “cloud”.

They are recorded at historical cost and updated according to current legislation:

(i) Refer to legal blockages directly in the company's current accounts and financial investments linked to certain legal proceedings. This amount is periodically analyzed and when identified, reclassification is made to one of the other specific accounts of the legal deposit item.

Civil

These are court deposits to guarantee the execution of civil proceedings where the Company is challenging the amounts involved. Most of these proceedings refer to lawsuits filed by customers, involving issues of consumer rights, among others.

There are some processes with differentiated matters, for instance, in which the value set by ANATEL for vacating certain transmission sub-bands is discussed, enabling the implementation of 4G technology. In this case, the amount deposited updated in court under discussion is R$ 73,631 (R$ 72,533 on December 31, 2021).

Labor

These are amounts deposited in court as guarantees for the execution and the filing of appropriate appeals, where the relevant matters or amounts involved are still being discussed. The total amount has been allocated between the various claims filed by registered employees and third-party service providers.

The company has legal deposits, relating to tax matters, made to support several ongoing legal discussions. Such deposits mainly relate to the following discussions:

The ownership interest in associated company or subsidiary is valued using the equity accounting method.

As mentioned in note 1, in November 2021, as a result of the spin-off of net assets of the broadband business and the creation of I-Systems (formerly FiberCo) with subsequent sale of 51% of its equity interest on behalf of IHS, TIM S.A. assessed the transaction as a loss of control and stopped consolidating it, recording the investment in an associated company, in the amount of R$ 1,612,957 at fair value for the remaining minority interest (non-controlling) of 49% (R$ 1,601,703 as of December 31, 2021).

TIM S.A. has 49% (49% on December 31, 2021) in the share capital of I-Systems (formerly FiberCo).

On March 31, 2022, the Company did not identify any impairment indicators and, therefore, there was no need to review the impairment test in the period.

Change of investment in associated companies:

Property, plant and equipment are stated at acquisition and/or construction cost, less accumulated depreciation and impairment losses (the latter only if applicable). Depreciation is calculated based on the straight-line method over terms that take into account the expected useful lives of the assets and their residual values. On March 31, 2022 and December 31, 2021, the Company has no indication of impairment in its property, plant and equipment.

The estimated costs of dismantling towers and equipment on rented properties are capitalized and depreciated over the estimated useful lives of these assets. The Company recognizes the present value of these costs in property, plant and equipment with a counter-entry to the liability “provision for future asset retirement”. Interest incurred on updating the provision is classified within financial expenses.

Gains and losses on disposal are determined by comparing the amounts of these disposals with the book value at the time of the transaction and are recognized in “other operating expenses (revenue), net” in the statement of income.