It is undeniable that the recovery of tax credits is an important tool for Brazilian companies of all sizes. However, RFB Normative Instruction No. 2,055/2021, issued by the Brazilian Federal Revenue Service, gives the federal agency the understanding that the offsetting of credits should be completed within five years of the final and unappealable decision in the lawsuit that recognized the taxpayer’s right.
In addition to contradicting article 168 of the National Tax Code (CTN), this understanding has a significant impact on taxpayers who have large tax credits. Depending on the company’s operational structure, it is not possible to use all of these credits in a short space of time.
Decisions by the Federal Regional Courts (TRFs), however, have recognized that this deadline should not be applied to the use of credits, but as a limit for the offsetting procedure to begin.
A very significant decision came from the 13th Panel of the TRF of the 1st Region. The Judge-Rapporteur of the case, Jamil Rosa de Jesus Oliveira, ruled that “(…) the five-year period is only for the start of the offsetting procedure and, considering that the offsetting has already begun, it is appropriate to use the total amount of credits recognized in court, until they are exhausted”.
Another decision, now by the 12th Federal Civil Court of Belo Horizonte/MG, in a writ of mandamus filed by Marcos Martins Advogados for a client in the metallurgical industry, dismissed the five-year deadline imposed by the RFB, recognizing that there is no time limit for the company to offset its tax credits. The decision guarantees greater stability for the company’s cash flow, which will not be prevented from “surprisingly” offsetting its credits.
In his ruling, Federal Judge Daniel Carneiro Machado stated “that it does not seem reasonable to impose on companies the requirement to consume/compensate their tax credits in a certain period of time, if the existence of outstanding debts to be offset depends on their size and activity. Such a requirement would constitute manifest arbitrariness without any legal basis, creating a clear restriction on the offsetting of unduly paid credit in contravention of the judicial enforcement order.”
The new understanding represents a significant victory for taxpayers when it comes to interpreting the tax offsetting legislation and demonstrates the essential need for a legal team to advise companies.
With the new interpretation, companies now have the opportunity to better plan how and when to use their tax credits, which can help relieve financial pressure, allowing them to act more strategically and in a way that is more appropriate to their circumstances.
