Panel: 2nd Panel of the 2nd Chamber of the 1st Section
Case Number: 10480.729848/2019-31
Parties: Energisa Paraiba – Distribuidora de Energia SA X Fazenda Nacional
Rapporteur: Andre Luis Ulrich Pinto
By a majority vote, the panel allowed the deduction of expenses resulting from energy theft from the tax base for Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL). The final score was 4-2.
For tax purposes, the values of so-called "non-technical losses" do not constitute an operational cost or expense for the company and, therefore, cannot be deducted when calculating taxable income. Aneel (Brazilian Electricity Regulatory Agency) classifies non-technical losses as primarily resulting from energy theft or fraud.
Furthermore, the tax authorities pointed out that the taxpayer only filed a criminal complaint about the theft after the tax audit had already begun, and did so in a generic way without identifying the possible responsible parties.
Attorney Maurício Faro, from BMA Advogados, argued that the stolen energy is a cost for the public service concessionaire, since it is "intrinsically linked to the exercise of the activity." The tax lawyer also argued that, since the amounts result from theft, the taxpayer meets the requirements of the Income Tax Regulations (RIR) that allow for the deduction.
The rapporteur, Councilor Andre Luis Ulrich Pinto, ruled that non-technical losses are part of the inherent cost of business activity and can be deducted. The judge also pointed out that the taxpayer needs to acquire more energy than it actually supplies, considering both technical and non-technical losses. For this reason, he understood that the losses could also be deducted as expenses.
The vote was witnessed by council members Roney Sandro Freire Corrêa, Fellipe Honório Rodrigues da Costa, and Liana Carine Fernandes de Queiroz.
Council members Leonardo Couto and Maurício Novaes Ferreira dissented and were outvoted. Ferreira believes it is problematic to authorize the deduction as a cost or expense without requiring the company to "have management activities in place to avoid this type of thing.".