After applying the casting vote, the 1st Panel of the 2nd Chamber of the 1st Section of the Administrative Council of Tax Appeals (Carf) allowed expenses with an end-of-year party of an advertising company to be deducted from the calculation basis of Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL). The case is being processed under number 9515.001539\/2008-70.<\/p>\n\n\n\n
The winning understanding was that end-of-year celebrations aim at the well-being of workers, and, therefore, would fit into the concept of \u201cnecessary expenses\u201d provided for in article 47 of Law 4,506\/64, which defines the operating expenses of companies.<\/p>\n\n\n\n
The rapporteur, Councilor Thais de Laurentiis, argued that social gatherings are part of the company's activities because they aim to improve the work environment, which can ultimately have a positive impact on profits. \u201cThe expense of social gatherings aims to benefit the business society as a whole, and is deductible from the tax base,\u201d she said.<\/p>\n\n\n\n
Councilor Efig\u00eanio de Freitas J\u00fanior disagreed. For him, if the company decided to hold the celebration, the burden should be borne by the company, and not shared with society. \u201cIt is not a necessary expense,\u201d he stated.<\/p>\n\n\n\n
Employees<\/p>\n\n\n\n
Another point discussed by the counselors was the size of the expense and what the limit would be to allow deductibility. While counselor Efig\u00eanio de Freitas J\u00fanior emphasized that large companies can throw large parties, with high costs, the rapporteur stated that in this specific case it was not something \u201cexaggerated\u201d, like a concert.<\/p>\n\n\n\n
For the president of the group, counselor Neudson Cavalcante Albuquerque, it is difficult to establish an objective criterion, but whatever it may be, it must achieve the celebration. Albuquerque argues that people are the company's greatest asset, and expenses in this sense are necessary. Furthermore, he argued that holding the celebration is not \u201creally a choice\u201d, because there is a demand that, if not met, causes a negative impact.<\/p>\n\n\n\n
\u201cWhatever the criteria, it has to achieve fraternization because it is a traditional thing, something that people expect to happen. They wait for the end of the year to meet up, to strengthen ties with people they hardly see during the year. So I say, if the criteria you are looking for exist and it does not achieve fraternization, it is wrong,\u201d he said.<\/p>\n\n\n\n
Councilor Fredy Jos\u00e9 Gomes de Albuquerque said he understands the potential negative impact on companies, whose employees may feel disrespected by a lack of socializing, but he questions the extent to which socializing is important for the company's activity. "To the extent that I make this a choice for the taxpayer, it is their choice whether it is necessary or not. And if that is the criterion, I cannot convince myself," he pointed out.<\/p>\n\n\n\n
The 1st Panel of the Superior Chamber made a different decision in May of last year. In case 10882.723478\/2015-71, of SS Com\u00e9rcio de Cosm\u00e9ticos e Produtos de Higiene Pessoal Ltda, the decision was to deny the possibility of deducting expenses.<\/p>\n\n\n\n
The 1st Ordinary Panel of the 3rd Chamber of the 1st Section has already decided on the possibility of deducting expenses with social gatherings in ruling 1301-005.771, in a case involving Unidas SA.<\/p>\n\n\n\n