The Federal Revenue Service has been tightening the siege to demand taxes on ICMS tax incentives, despite decisions by the Judiciary and the Administrative Council of Tax Appeals (Carf) favorable to taxpayers. Last year alone, the Tax Authority published 32 consultation solutions on the subject \u2013 more than double the number of statements in 2020 (13). \u201cThis is one of the major bottlenecks in the tax area\u201d, says Daniel Zugman, partner at BVZ Advogados, the firm that conducted the survey.<\/p>\n\n\n\n
To get an idea of the financial impact of this debate on the Union's coffers, the discussion in the Federal Supreme Court (STF), with general repercussions, relating only to the incidence of PIS and Cofins on such amounts could have an impact of R$1.5T 3.3 billion, according to the Attorney General's Office of the National Treasury (PGFN).<\/p>\n\n\n\n
In its responses to taxpayers' questions published in 2021, the IRS states that companies are only exempt from paying Corporate Income Tax (IRPJ) and CSLL if the incentives were granted for the implementation or expansion of an economic enterprise. Or, in other words, that it is the taxpayer's duty to analyze the terms and conditions under which such incentives were granted.<\/p>\n\n\n\n
\u201cThere is a similarity in the responses, but none of them conclude that a certain benefit can be excluded from taxation,\u201d says Frederico Bastos, also a partner at BVZ.<\/p>\n\n\n\n
The dispute is long-standing. With Complementary Law No. 160 of 2017, the market considered the discussion to be at a standstill, by predicting that tax incentives granted by states and the Federal District are subsidies for investment \u2013 and therefore, exempt from federal taxes.<\/p>\n\n\n\n
The rule included paragraph 4 in article 30 of Law No. 12,973 of 2014, according to which requirements or conditions not provided for in the article are prohibited. One of the requirements is that the resource with the tax savings remains within the company (as a profit reserve) and is not distributed to the partners.<\/p>\n\n\n\n
However, according to lawyers, the IRS began a movement just over a year ago to impose stricter conditions. It was with Consultation Solution (SC) No. 145, published in December 2020 by the General Coordination of Inspection (Cosit), which guides the country's inspectors. In it, it predicted that only incentives granted as a stimulus for the implementation or expansion of economic ventures \u2013 with the construction or modernization of industrial plants, for example \u2013 would escape taxation.<\/p>\n\n\n\n
\u201cThe market was on alert after this solution, the fight will start again. The tax authorities are signaling that they want something concrete,\u201d says Renato Reis Batiston, partner in the tax area at Cescon Barrieu. After SC 45, he says, others were published along the same lines over the course of last year. \u201cThe chance of receiving a favorable response has decreased significantly,\u201d he points out. With the negative statements, the risk of fines returns, warns tax specialist Ana Cl\u00e1udia Utumi, partner at Utumi Advogados.<\/p>\n\n\n\n
In one of the guidelines published last year (SC Cosit n\u00ba 94), the Tax Authorities declassify as a subsidy for investment \u2013 which is exempt from taxation \u2013 tax incentives \u201cgranted without any burden or duty to the subsidized party, unconditionally or under conditions not related to the implementation or expansion of an economic enterprise\u201d.<\/p>\n\n\n\n
Tax experts, however, have advised clients to continue considering the incentives as investment subsidies and to waive taxation. \u201cI see no legal reason to change the tax treatment,\u201d says lawyer Ana Cl\u00e1udia Utumi.<\/p>\n\n\n\n
According to LC 160, what should be analyzed is whether it is a tax incentive granted by states or the Federal District, and not what was done with the resources generated by the ICMS savings. \u201cIt is not possible to change the understanding of the law by means of a consultation solution. The Tax Authorities want to resurrect a discussion that they lost,\u201d she says.<\/p>\n\n\n\n
The Superior Chamber of the Carf, the highest instance of the council, issued five decisions favorable to taxpayers last year, related to IRPJ requirements, according to a survey by the BVZ law firm (case no. 13116.721486\/2011-29, for example). In April, the 1st Section of the Superior Court of Justice (STJ) standardized the Court's understanding. For the ministers, the Union cannot demand IR and CSLL on presumed ICMS credits. This is because the incentive would not constitute profit and taxation would violate the federative principle.<\/p>\n\n\n\n
\u201cThe taxation by the Union of amounts corresponding to tax incentives encourages indirect competition with the member State, to the detriment of cooperation and equality, cornerstones of the Federation\u201d, stated Minister Regina Helena Costa, in the ruling (Eresp n\u00ba 1443771).<\/p>\n\n\n\n
According to Zugman and Bastos, the discussion on IR and CSLL is more stable. However, there is still a dispute over the collection of PIS and Cofins on ICMS tax benefits. In September, the 2nd Panel of the STJ unanimously released a company from collecting social contributions \u2013 in addition to IR and CSLL \u2013 on presumed credits from the state tax. \u201cSuch credits do not, strictly speaking, constitute an increase in revenue capable of affecting the calculation basis of the contribution,\u201d stated Minister Francisco Falc\u00e3o, in his vote (AgInt in REsp n\u00ba 1813018).<\/p>\n\n\n\n
When considering the matter, the STF is divided on the taxation of PIS and Cofins. The analysis in the Virtual Plenary was tied at four votes to four in April, when Justice Gilmar Mendes requested a highlight. The appeal with general repercussions was referred to the Physical Plenary. It was included in the agenda of the November session by the president, Justice Luiz Fux, but was withdrawn.<\/p>\n\n\n\n
In addition to the rapporteur, Justice Marco Aur\u00e9lio \u2013 who retired in July \u2013, Justices Rosa Weber and C\u00e1rmen L\u00facia and Justices Edson Fachin and Ricardo Lewandowski voted in favor of the companies. Justices Alexandre de Moraes, Gilmar Mendes, Nunes Marques and Luiz Fux voted in favor of the Union (RE 835.818, Theme 843). There is no forecast for when the case will be judged.<\/p>\n\n\n\n
In a note sent to Valor, the Federal Revenue Service reinforced the position set forth in SC No. 145. It stated that the legal change itself \u2013 brought about by LC No. 170 \u2013 maintained as a condition for classifying the incentive as \u201cfor investment\u201d the conditions already set forth in article 30 of Law 12,973.<\/p>\n\n\n\n
The device, in turn, says the Tax Authorities, expressly states that one of the conditions for classification as an investment subsidy is that it is granted \u201cas a stimulus to the implementation or expansion of economic ventures\u201d.<\/p>\n\n\n\n