By unanimous decision, the panel ruled that expenses related to technological innovation projects not validated by the Ministry of Science and Technology (MCTI) cannot be deducted from taxable income based on the Good Law (Law 11.196/2005), even if an agency linked to the ministry prepares technical reports favorable to the taxpayer. Therefore, the collection of Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) related to attempts by WEG in 2016 to exclude expenses on projects was upheld.
According to the proceedings, some of the projects submitted by the company that year were rejected by the Ministry of Science, Technology and Innovation (MCTI) for failing to meet the requirements of the Good Law and Decree 5.798/2006, which regulated the law. This led to the cancellation of the respective deductions by the tax authorities. The taxpayer's defense, in turn, presented opinions from the National Institute of Technology (INT) attesting that the projects were eligible for the benefits.
In April 2024, the 1st Panel of the 3rd Panel of the 1st Section converted the judgment into a procedural step. At that time, the panel asked the MCTI (Ministry of Science, Technology and Innovation) to answer, among other points, whether an opinion from the INT (National Institute of Technology) would bind the ministry's previous understanding and whether the reports presented by the taxpayer would attest to the eligibility of the questioned projects for the benefits of the Lei do Bem (Law of Good).
The Ministry of Science, Technology and Innovation (MCTI) responded that the technical reports from INT presented by the company are not valid under the Good Law (Lei do Bem) and that the taxpayer failed to appeal the negative decision issued by the ministry administratively. Therefore, the rapporteur, Councilor José Eduardo Dornelas Souza, voted to invalidate the deductions sought by WEG.
Profits abroad
In the same case, the panel upheld the assessments of corporate income tax (IRPJ) and social contribution on net profit (CSLL) due to the failure to include profits earned by an indirectly controlled WEG subsidiary based in Austria. The decision was reached by a tie-breaking vote.
The assessment was based on Article 76 of Law 12.973/2014. This provision requires the recording, in sub-accounts of the investment account, of accounting results related to variations in the value of investments equivalent to profits or losses earned by direct or indirect subsidiaries abroad. The defense argued that the assessment would violate the international treaty to avoid double taxation signed between Brazil and Austria (Decree 78.107/1976).
The prevailing opinion, favorable to the tax authorities, was that the domestic rule does not violate the agreement signed between the countries because it taxes the Brazilian parent company's stake in the foreign company, and not the latter's profit. This was the vote of council members Iágaro Jung Martins, Luís Ângelo Carneiro Baptista, and Rafael Taranto Malheiros, the chairman of the panel.
Council members José Eduardo Dornelas Souza, Eduarda Lacerda Kanieski, and Maria Angélica Echer Ferreira Feijó sided with the taxpayer and were outvoted.
Source: JOTA