The Brazilian Supreme Court (STF) ruled on Thursday (May 13) that the exclusion of ICMS from the PIS and COFINS calculation basis will be effective as of March 15, 2017, the date of the judgment on the merits of the case. The justices opted for a \u201cforward\u201d modulation, with no retroactive effects, and only the legal and administrative actions filed up to the date of the 2017 judgment are exempted. The justices also defined that the ICMS to be removed from the contribution basis is the one highlighted on the invoice.<\/p>\n\n\n\n
In general, the Supreme Court's position is favorable to taxpayers. This is because, despite only allowing for actions filed up to 2017, it has defined that the ICMS to be withdrawn is the one highlighted, and not the one actually paid, as defended by the Attorney General's Office of the National Treasury (PGFN) and the Federal Revenue Service.<\/p>\n\n\n\n
In practice, with the Supreme Court's decision, taxpayers who filed lawsuits up until 2017 can be reimbursed for the undue collection of tax in relation to the five years prior to filing the lawsuit, both in the Judiciary and in administrative bodies, such as the Federal Revenue offices and the Administrative Council of Tax Appeals.<\/p>\n\n\n\n
Those who did not file lawsuits by March 15, 2017 may request a refund if they paid PIS and Cofins unduly with the inclusion of ICMS as of this date. After all, according to the Supreme Court's decision, as of March 2017, ICMS will no longer be included in the calculation basis for contributions.<\/p>\n\n\n\n
The taxpayer who was paying for the ICMS collected, as per the Federal Revenue Service's guidance in consultation solution 13\/2018, can also request the difference paid unduly.<\/p>\n\n\n\n
The judgment of the declarations of embargo filed by the National Treasury in RE 574,706 had been expected for four years and should answer two main questions raised by the tax authorities: from what moment should the ICMS be removed from the contribution base and whether the ICMS to be removed should be the one actually paid or the one highlighted in the invoice.<\/p>\n\n\n\n
The winning modulation, by 8 votes to 3, was proposed by the rapporteur, Justice C\u00e1rmen L\u00facia. The Justice pointed out that the STF, since 2014, has issued decisions in favor of the exclusion of ICMS from the calculation basis of PIS and Cofins, however, with a different composition and without general repercussions. Therefore, modulation would be necessary to maintain legal certainty.<\/p>\n\n\n\n
Justices Edson Fachin, Rosa Weber and Marco Aur\u00e9lio were defeated. The judges voted to allow the decision in favor of taxpayers to be retroactive, making it possible to refund PIS and Cofins amounts collected unduly.<\/p>\n\n\n\n
C\u00e1rmen L\u00facia's position was also predominant regarding the doubt raised by the Treasury about which ICMS should be deducted from PIS and Cofins. By 8 votes to 3, the ministers decided on the one highlighted in the invoice, which benefits taxpayers. Ministers Nunes Marques, Lu\u00eds Roberto Barroso and Gilmar Mendes disagreed with the rapporteur and were defeated.<\/p>\n\n\n\n
The ruling on the appeals puts an end to the biggest tax issue analyzed by the Supreme Court in recent years. The PGFN estimated an impact of R$15T 258.3 billion if there were no modulation of any kind. The estimate was related to the ICMS actually paid, and, according to the tax authorities, for the ICMS highlighted, the \u201cimpact will multiply to unpredictable values\u201d.<\/p>\n\n\n\n
In a webinar promoted by JOTA, the National Treasury attorney Leonardo Alvim stated that 78% of the actions on the subject were filed after the 2017 decision, however, he did not specify the impact of this number of decisions on the R$$ 258.3 billion.<\/p>\n\n\n\n
The analysis of the embargoes was of interest to the federal government and companies. The Minister of Economy, Paulo Guedes, met personally with the Chief Justice of the Supreme Court, Luiz Fux, to request modulation. On the other hand, taxpayers claimed that modulation could bring economic losses, legal uncertainty, an increase in the Cost of Brazil and a flight of investments.<\/p>\n\n\n\n
The eight votes in favor of modulation totaled 2\/3 of the Court's quorum. Thus, the justices did not enter into the discussion on the possibility of modulation in an extraordinary appeal being done with six judges. C\u00e1rmen L\u00facia was supported by justices Nunes Marques, Alexandre de Moraes, Lu\u00eds Roberto Barroso, Dias Toffoli, Ricardo Lewandowski, Gilmar Mendes and Luiz Fux. Edson Fachin, Rosa Weber and Marco Aur\u00e9lio were against modulation.<\/p>\n\n\n\n
In the session held on Thursday (13\/5), Minister Nunes Marques opened the divergence regarding the distinction between ICMS to be removed from the calculation basis for PIS and Cofins. The judge voted in line with the tax authorities so that the ICMS should be the one actually paid, and not the one highlighted on the invoice. In practice, this position is detrimental to companies, since the ICMS paid tends to be lower than that highlighted on the invoice due to the use of credits.<\/p>\n\n\n\n
\u201cIf we adopt the idea that the ICMS would be highlighted in the note, there would be a true cumulative deduction, a value higher than the tax collected from the member states,\u201d said the minister during the reading of the vote. \u201cIf we follow the thesis of the ICMS highlighted in the note, there will be unjust enrichment of the taxpayer,\u201d he added.<\/p>\n\n\n\n
The minister justified a different vote given in a decision at the TRF1 on the same topic. According to him, at the time, he voted for the collegiate, which was in favor of the ICMS highlighted on the invoice, and therefore, he agreed. Regarding the modulation of the effects, Nunes Marques agreed with the rapporteur.<\/p>\n\n\n\n
Justice Alexandre de Moraes agreed with rapporteur C\u00e1rmen L\u00facia. During his vote, the judge criticized the thesis presented by the National Treasury of differentiating the ICMS paid from the one highlighted on the invoice. \u201cWhile there was taxation for the IRS, the Union never complained that it was highlighted on the invoice, now the Union comes to say that there is no such possibility of highlighting it on the invoice. Either before there was an abusive interpretation or now this interpretation is erroneous. During this entire period, the Union collected the ICMS highlighted on the invoice\u201d, stated the judge.<\/p>\n\n\n\n
Moraes also highlighted that modulation is pertinent because there has been a shift in case law on the issue. The minister cited data from the PGFN that, of the 56,000 cases mapped on the subject, 78% were filed after the STF decision in 2017. \u201cIf there is no modulation, there will be thousands and thousands more lawsuits.\u201d<\/p>\n\n\n\n
Next, Justice Edson Fachin voted against any modulation and rejected the distinction between paid or detached ICMS. \u201cThere is nothing to clarify, there is no need to address any defect that could disturb the decision taken. This is no longer the time to give effect to a review action,\u201d he stated. Fachin also questioned the figure of R$$ 258.3 billion brought by the tax authorities. According to him, the accounts are not accurate.<\/p>\n\n\n\n
The judge's position would allow the decision favorable to taxpayers to be retroactive and allow for the refund of PIS and Cofins amounts collected unduly. For the judge, the loss of revenue cannot be used as an argument to request a modulation unfavorable to taxpayers. \u201c[The Union] cannot take advantage of their negligence and place the burden on taxpayers to bear the amounts that were unduly collected,\u201d he stated during the trial.<\/p>\n\n\n\n
Justice Lu\u00eds Roberto Barroso agreed with Nunes Marques\u2019 dissent and understood that it is necessary to differentiate the ICMS to be withdrawn from the PIS and Cofins calculation basis. \u201cThe ICMS highlighted in the note includes not only the amount of the tax that the taxpayer will have to pay, but also the ICMS that was levied on the previous transaction. This ICMS in the previous transaction will generate the right to credit and offset, it is not an amount collected by the taxpayer. Therefore, since it is not a portion to be collected, I see no reason for it to be included in the calculation basis.\u201d Barroso accepted the modulation proposed by the rapporteur.<\/p>\n\n\n\n
Minister Rosa Weber agreed with Minister Edson Fachin: no modulation and no distinction between the ICMS paid and highlighted on the invoice. \u201cThere are no sufficient legal reasons to justify the modulation of effects.\u201d<\/p>\n\n\n\n
Justice Dias Toffoli fully agreed with C\u00e1rmen L\u00facia. He recalled that, at the time of the trial, he understood that the inclusion of ICMS in the calculation basis for PIS and COFINS was compatible with the Federal Constitution. Justice Ricardo Lewandowski also voted with the rapporteur, who, according to him, found a \u201cbalanced and reasonable solution.\u201d<\/p>\n\n\n\n
Minister Gilmar Mendes agreed with the divergence brought by Nunes Marques, with ICMS effectively paid and modulation. \u201cModulation is not a judge\u2019s choice, it is an imposition of the normative force of the Constitution\u201d, he stated during the vote.<\/p>\n\n\n\n
Justice Marco Aur\u00e9lio voted like Fachin and Rosa Weber: against modulation and in favor of the ICMS being highlighted on the invoice. \u201cModulation is not consistent with the subjective process.\u201d Finally, the president of the STF, Luiz Fux, agreed with the rapporteur, who, according to him, \u201cleft no stone unturned\u201d in her vote.<\/p>\n\n\n\n
In a note sent to the press, the PGFN explained that the reserved lawsuits constitute the minority of the disputes on the subject. According to the entity, with the Supreme Court's decision, \u201cthe amounts collected by the public coffers with the inclusion of ICMS in the calculation basis of PIS and Cofins until the judgment of March 2017 were definitively protected\u201d.<\/p>\n\n\n\n
The note also says: \u201cThe conclusion of this trial definitively resolves the country's main tax controversy, and it is unequivocal that the partial acceptance of the objections filed by the National Treasury will reduce the enormous impact that the ruling, without this reservation, would have on public finances.\u201d<\/p>\n\n\n\n
According to Matheus Bueno, partner at Bueno & Castro Tax Lawyers, the ruling provides tax certainty to companies. According to him, since 2017, taxpayers have been adopting different positions on the issue: some companies stopped paying ICMS on PIS and Cofins, while others continued to pay even after the final judgment. \u201cBased on this ruling, there is no excuse for companies not to change their routine, whether by recognizing credits not yet captured, reducing the future tax base and renegotiating prices with suppliers.\u201d<\/p>\n\n\n\n
For tax specialist Jos\u00e9 Eduardo Toledo, the taxpayer emerged victorious, \u201cas any doubts about which ICMS should be excluded from the PIS\/COFINS calculation basis have been eliminated, and the STF has ratified what it had already said: it is the one highlighted on the invoice. Thus, the Cosit 13\/2018 consultation solution has lost its effects and taxpayers will be able to recover the correct amount, logically, following the respective legal actions\u201d.<\/p>\n\n\n\n
Breno Vasconcelos, a researcher at Insper and Funda\u00e7\u00e3o Get\u00falio Vargas (FGV), and a partner at the firm Mannrich e Vasconcelos Advogados, explains that, in practice, taxpayers who have not filed lawsuits to question the levy will now be able to exclude the ICMS amount highlighted in their invoices from the PIS and Cofins calculation basis.<\/p>\n\n\n\n
\u201cThey will also be entitled to recover the PIS\/Cofins amounts paid on the ICMS highlighted from 3\/16\/2017 to the present day and, if they have already stopped taxing this portion, they will not be able to be fined by the Federal Revenue Service. Taxpayers who, on 3\/15\/2017, had lawsuits or administrative proceedings in which the subject was discussed, must observe the respective dates of filing of the lawsuits or of the triggering facts questioned in the administrative proceedings, to assess the amount to be recovered\u201d, he explains.<\/p>\n\n\n\n
RE 574.706<\/a><\/p>
Decision Theme 69 \u2013 Inclusion of ICMS in the calculation basis for PIS and COFINS.<\/a><\/p>