1/2/2020
The Brazilian Revenue Service has recently published a normative ruling (IN No. 1,911/19) to regulate the calculation, charge, overseeing, payment and management of social contributions PIS/COFINS and PIS/COFINS on Imports.
The new normative ruling lays down new rules, revokes over fifty other normative rulings and opens up a discussion on the calculation of the credits arising from PIS/COFINS upon the purchase of input, goods for resale and assets to be incorporated into fixed assets.
Under the new normative ruling (section 167), the purchase value to be used as tax base includes (i) the amount paid as insurance and freight upon purchase, provided that such costs are born by purchaser; and (ii) the amount paid as tax on industrialized goods (IPI) upon purchase, whenever such tax is non-reimbursable.
Unlike the previous regulation (normative ruling No. 404/04, revoked by this IN 1,911/19), the new rule makes no express reference to the tax on circulation of goods and services (ICMS).
In practice, what happens is that from now on, any amount paid as ICMS and indicated in the supplier’s invoice is not to be included in calculating the credits arising from PIS/COFINS.
This change of position is most likely due to a recent decision by the Brazilian Supreme Court ruling that the amount paid as ICMS is not to be taken into account in calculating the amount payable as PIS and COFINS. The rationale behind this norm is probably that since the Courts have already settled on the exclusion of ICMS from the PIS/COFINS base on sales, it is only logical to exclude ICMS from the PIS/COFINS credits on purchases.
However, there are two pieces of legislation (Law No. 10.637/02 and Law No. 10.833/03) that prescribe that any PIS/COFINS credits are to be calculated based on the value of the purchased goods and services, and this value includes the amount paid as ICMS.
So, as one would expect, the new Revenue Service’s rule may still be a subject for discussion. This is why we recommend that taxpayers should take a conservative approach and seek in court their right to keep the amount of the ICMS in calculating PIS/COFINS credits upon the purchase of goods and services.
Our tax practice team is ready to provide guidance and further information on this topic.
