O The Administrative Council of Tax Appeals (Carf) has changed its position and cancelled a tax assessment for Industrialized Products. (IPI) of R$ 120 million against Action, a hair dryer manufacturer. By a casting vote, the court understood, for the first time, that Law No. 14,395 of 2022, which introduces the concept of market for determining the minimum taxable value in sales between companies of the same economic group, can be applied retroactively, as it is an interpretative norm.
The topic is one of 17 theses with significant economic impact foreseen in the call for proposals for the Comprehensive Transaction Program (PTI), created in 2024 by the Attorney General's Office of the National Treasury (PGFN), which expects to raise R$40 billion. According to lawyers, the precedent could serve as a model for similar cases at CARF (Administrative Council of Tax Appeals), especially for cosmetics companies such as L'Oréal, Avon, Unilever, and Natura. Together, these cases involve nearly R$1,150,500.
The case was judged by the 3rd Panel of the Superior Chamber – the last instance of the administrative court. The rapporteur, Tatiana Josefovicz Belisario, denied the appeal from the PGFN and upheld the previous decision, whose winning vote was cast by council member Laércio Cruz Uliana Junior (case no. 13370.722417/2020-12).
The issue discussed in the Action case was the application of the concept of "market," which is the basis for calculating the so-called Minimum Taxable Value (VTM) – the floor for IPI (Tax on Industrialized Products) collection – as stipulated in the 2022 law. Since the case predated this, the taxpayer argued for the retroactive application of the rule, which settled the matter and defined "market" as the municipality where the sending establishment is located. According to tax experts, the position of the Superior Chamber of the CARF (Administrative Council of Tax Appeals) was unfavorable to taxpayers.
The case involves sales made by a taxpayer's factory located in Varginha (MG) to a distribution center in Extrema (MG). While Action defended the calculation of IPI (Tax on Industrialized Products) based on the weighted average of prices practiced by the establishments, the Revenue Service considered the resale value to other independent clients.
The issue is divisive. In July of last year, the same Superior Chamber ruled against Carvalho Cosmetics Industry. According to the majority of the council members, the new law was not open to interpretation and lacked a specific provision indicating this intention. The company appealed (case no. 10872.720385/2016-95).
Six months later, the board's understanding changed, as council member Denise Madalena Green, who had voted in favor of the tax authorities, changed her position.
According to the rapporteur, Tatiana Josefovicz Belisario, one of the arguments that makes the rule interpretative is that Law No. 14,395 of 2022 inserted Article 15-A into Law No. 4,502 of 1964 to clarify the concept of a public square, instead of altering the provision.
“When you modify something, it has effects going forward. When you interpret it, it has effects going backward. If the law only wanted to modify something, it wouldn't have inserted article 15-A. It would have simply changed the wording so that instead of 'square,' it would say 'municipality,'” he says.
In her view, as she was also the rapporteur for the Carvalho Industry case, there has been a "maturation of the debates within the panel," and the new interpretation could be applied to other cases. "In principle, this scenario is expected to be maintained," she states, noting that for cases pending judgment on motions for clarification, altering the merits would be difficult.
Action's decision differs from other rulings in the CARF, such as those in 2024, in which the Superior Chamber upheld tax assessments against Natura, in the amount of R$ 823 million, and against Avon, in the amount of R$ 1 billion (cases no. 16561.720176/2012-16 and no. 19515.720949/2017-12).
In a more recent analysis, from January, L'Oréal won in the 1st Ordinary Panel of the 3rd Chamber of the 3rd Section, but the Union has already appealed. In this action, R$ 840 million in IPI (process no. 16682.721207/2018-67) is being discussed. In the case of Unilever, the company lost in the lower chamber and is also awaiting analysis of its appeal (process no. 10880.9370 63/2021-41).
According to lawyer Giancarlo Matarazzo, a partner at Pinheiro Neto who worked on the Action case, the segregation between factory and distributor is common in the market due to its tax benefits. "The IPI (tax on industrialized products) is paid at the factory but not at the distributor, because the IPI is a tax paid on manufactured goods," he says.
The tax authorities, says Matarazzo, understood that "market" is a broader concept and that in intra-group operations, the distributor's price should be considered. With the new law enacted in 2022, this discussion ceased, as it defined "market" as the city, including the factory price if it is in a different municipality from the distributor, and a "normal" profit margin – around 5% to 8%.
Taxpayers have always argued that the law is open to interpretation and therefore should have retroactive effect. But the tax authorities understood that it only applied to future taxable events,” says Mattarazzo. According to him, with this decision, the CARF (Administrative Council of Tax Appeals) validates the companies' argument. “It's a very symbolic victory because it changed the understanding of the Superior Chamber, and Law No. 14,395 now applies retroactively, potentially serving as a basis for other tax assessments,” adds the lawyer, who has about 20 cases on the subject.
The decision also prevents taxpayers from having to go to court, which would imply more costs – including the presentation of guarantees. Council member Laércio Cruz Uliana Junior, who cast the deciding vote in the Action case in the lower chamber, says that the tax authorities understood that the concept of "market area" should be the metropolitan region, for example. "But another line of thought is that 'market area' is equivalent to the concept of 'city,' as established in Commercial and Business Law," he states.
According to the advisor, Law No. 14,395 of 2022 is interpretative and retroactively applicable. "The law itself doesn't say it's interpretative, but some advisors, like myself, understand that it is, considering the explanatory memorandum of the rule and that there's no need for this to be explicitly stated in the law. And there are already precedents from the Superior Court of Justice validating this understanding," he says.
Contacted by Valor, the PGFN declined to comment.
Source: Economic Value