The Superior Chamber of the Administrative Council for Tax Appeals (CARF) recently unanimously approved a ruling in favor of taxpayers on the possibility of crediting PIS/COFINS on input expenses in the agricultural phase prior to industrialization. The approved precedent recognizes that “spending on inputs in the agricultural phase, known as ‘input inputs’, allows the right to credit related to the non-cumulative PIS/PASEP and COFINS Contribution”.
But what are “input inputs” and the previous agricultural phase?
“Input inputs” are nothing more than the supplies or costs/investments made in the production of inputs, generally used in the agricultural phase prior to industrialization. In other words, the inputs produced will be used to make other goods during the industrialization process.
In practice, an agricultural producer, for example, has several essential costs with the raw material (sugar cane) that will later impact on the final production of an industrialized good (alcohol, sugar or even energy).
Until the final product is produced, the agricultural producer will have to bear various costs during the preliminary phase, which can include: extraction, sealing, transportation of goods, maintenance of equipment used, among others. These costs encompass the entire production process of the goods, and are not dissociated from the previous phase of the legal entity’s total production chain.
Impact of the decision on producers
COSIT RFB Opinion No. 05/2018 already considered that “the input of the input constitutes a structural and inseparable element of the production process or the execution of the service, fulfilling the criterion of essentiality for inclusion in the concept of input”.
Thus, taking into account the criteria of essentiality and relevance of inputs in the development of the company’s activities, as already defined by the STJ in the past, in addition to the existing legal provision defining the possibility of credit in these cases, the CARF ruling only concludes the issue, recognizing the possibility that costs disbursed during the pre-production period (“input of the input”) give rise to the right to PIS/COFINS credit.
Although CARF case law already has many precedents recognizing this possibility of crediting, the consolidation of this understanding via a precedent significantly reduces litigation on the subject, bringing legal certainty to taxpayers.
In addition, the measure represents a significant relief for agricultural producers, given the high costs that efficient, technological and quality production requires. This recognition facilitates financial and tax planning for producers, allowing for better allocation of resources and greater predictability in business.
If you have any questions, our tax team is at your disposal for clarification and guidance.
