Angelo Ambrizzi
Lawyer at Marcos Martins Advogados
The exclusion of ICMS from the PIS and Cofins tax base was ruled in favor of taxpayers and became known as the “thesis of the century”, in view of the large amounts refunded to taxpayers.
Recalling that, in May of this year, the STF excluded ICMS from the PIS and Cofins tax base, according to calculations by the Independent Fiscal Institution (IFI), the decision could represent a loss of approximately R$ 120 billion in federal tax revenue in 2021.
Although the case has already been heard by the Federal Supreme Court (STF), it continues to have positive financial repercussions for taxpayers, but now for service providers.
Brazilian law stipulates that companies providing services must pay the Tax on Services of Any Nature (ISSQN), the rate of which varies between 2% and 5% of the value of the service provided. Thus, service providers must pay ISS, while industry and commerce must pay ICMS.
The federal tax authorities determine that both ISS and ICMS must be included in the Pis and Cofins calculation base. In this way, the legal rationale used to exclude ICMS from the basis for calculating the contributions applies entirely to ISS.
Faced with the possibility of a judicial challenge to the exclusion of ISS from the contribution base, it is possible for companies to take legal action to reduce the federal tax burden.
Reducing the tax burden has an immediate financial impact. The monthly savings can be used to improve internal processes, pay off existing tax debts or even increase profitability.
In addition to the immediate advantage, companies can claim back what has been unduly paid in the last five years from the date the lawsuit was filed. Thus, for every month that the entrepreneur delays in filing the lawsuit, he will lose a month retroactively.
In addition to the deadline, it is important to make it clear that companies that do not file a lawsuit may have their refund deadline limited by the Supreme Court’s decision, as recently happened in the “thesis of the century”, in which companies lost millions of reais in refunds. It is undeniable that there is money on the table.
The exclusion of ISS from the PIS and Cofins tax base could provide companies with a refund of approximately R$6.1 billion, according to the Budget Guidelines Law (LDO). This figure could reach R$32 billion if the federal government has to refund the amounts paid by taxpayers over the last five years. Faced with this scenario, our recommendation is that service providers take legal action to create an environment of legal certainty.
