Our law firm recently received a favorable decision for a client in a business tax dispute pertaining to the calculation of the PIS and COFINS tax bases. The 6th Federal Civil Court of Vitória ruled that not only the amount of the ICMS tax but also the amount of the very PIS and COFINS are not to be included in the tax bases of the PIS and COFINS. The court also ruled that all amounts paid in excess – due to the higher tax base – in the past five years from the filing of the lawsuit are to be offset.
This ruling is in line with a decision previously issued by the Brazilian Supreme Court, or STF (appeal RE No. 574.706). In that case, the STF ruled that including the ICMS in the PIS and COFINS tax bases was unconstitutional and that including the PIS and COFINS in their own tax bases was also to be ruled unconstitutional. The STF also acknowledged that the subject matter of that dispute was of general repercussion.
According to such STF decision, the logic that follows is that not only the ICMS but also the PIS and COFINS are not to be included in the PIS and COFINS tax bases and, therefore, such inclusion can be challenged in court. The reason is that neither the ICMS nor the PIS/COFINS are part of the business entity’s equity.
The decision issued in favor of our client is still subject to appeal. In any case, it is an important win that may serve as reference to other companies that wish to seek similar relief in court. So, we advise companies to claim their rights in court as soon as practicable so as to seek reimbursement of as much taxes as possible – going back five years from the filing of the lawsuit.
Our tax practice team is ready to provide further information on this topic.
