10/1/2019
The motion for clarification in the leading case concerning the inclusion of the ICMS tax in the PIS and Cofins tax bases has been scheduled to be considered by the Brazilian Supreme Court’s (STF) Justices on December 5 this year.
Justices will then analyze the National Treasury’s motion requesting, among other things, that Justices set the limits of the 2017 STF decision excluding the ICMS from the PIS and Cofins tax bases. The motion requests that the 2017 STF decision start producing effects only as from January 2018.
If the motion is granted, limiting the effects of the 2017 STF decision will preclude all taxpayers’ claims of refund filed until December 2017 for overpayment of PIS and Cofins due to the amount of ICMS being previously included in the PIS and Cofins tax bases. The case involves billions of reais. Figures reflected in the 2020 budgetary law (LDO) show that the government would lose BRL45.8 billion in taxes in one single year; BRL229 billion in 5 years.
Additionally, the National Treasury’s motion also requests STF Justices to explain exactly what portion of the ICMS is not to be taken into account when calculating the PIS and Cofins: The portion of the ICMS indicated in the invoice or the amount of the ICMS actually paid.
If the STF rules that the portion of the ICMS to be excluded from the PIS and Cofins tax bases is the amount actually paid – as requested by the National Treasury – this would be bad news for companies. Because it is a common practice for companies to use tax credits, the amount actually paid as ICMS is usually lower than the amount indicated in the invoice.
This latter issue has already been brought to the Brazilian Superior Court of Justice (STJ), but both the 1st and 2nd panels of the STJ have ruled that it is up to the STF to rule on which portion of the ICMS is to be excluded from the calculation of the PIS and Cofins.
All of this only proves how important the STF decision schedule for December will be, as it may even affect rulings given in favor of companies that has already became final in the past 2 years. This is because, depending on what the STF Justices may rule, the National Treasury may seek reversal of previous decisions.
Our tax practice team is ready to provide further information on this topic.
