Pedro Rezek Andery Altran
Lawyer at Marcos Martins Advogados
The buying and selling relationship can involve several variables between the seller and the buyer, one of which is the discount granted on the goods/services.
This practice has several objectives, which can be to increase the company’s competitiveness in the market, to encourage cash payment, among others.
Discounts can be offered when the good/service is purchased or afterwards. In the first case, they are classified as unconditional discounts, i.e. there is no special condition for the seller to reduce the value of the goods.
The second type is called a conditional discount. As the name implies, there is a condition for it to be granted, such as a 10% discount in the case of bills paid before the due date.
Although there are no difficulties in understanding the concepts, granting these discounts can cause confusion in company accounting depending on how they are measured.
In other words, because they reduce the price of the goods, they can become an expense for the seller or income for the buyer. This is what the IRS understands:
Conditional discounts are those that depend on an event subsequent to the issuance of the invoice, usually payment of the purchase within a certain period, and constitute financial expense for the seller and financial income for the buyer.” (Cosit Consultation Solution No. 34, of November 21, 2013).
Having defined the concepts of unconditional and conditional discounts , we now move on to analyze their effects for companies with presumed profit that operate in the real estate business.
Presumed profit companies have a general rule for calculating income tax ( IRPJ), which is to apply a variable percentage to gross revenue less returns, canceled sales and unconditional discounts.
For the calculation of PIS and COFINS, the calculation basis is gross revenue, excluding certain items, including unconditional discounts.
The exclusion of unconditional discounts is set out in the legislation governing income tax, PIS and COFINS, so there is no doubt about this. However, there is no mention in these laws about the exclusion of conditional discounts, and as mentioned above, the IRS believes that they should be classified as an expense for the seller and income for the buyer.
It turns out that legal entities in the real estate business (land subdivision, real estate development, construction of buildings for sale and real estate built or acquired for resale) have their own rules, and this peculiarity differentiates them from other legal entities.
The rule for them is that gross revenue comprises the amount actually received, relating to the real estate units sold, as provided for in article 30 of Law No. 8,981/95, and the basis for calculating taxes on income/billing cannot exceed this limit.
Therefore, the limitation prevents discounts offered, even if granted conditionally, from being included in this account, as they do not represent amounts received by companies on the sale of real estate units.
This understanding was confirmed by the Federal Revenue Service in Consultation Solution No. 106 of 2020:
The values of discounts granted even conditionally, as they do not represent the value actually received from the sale of real estate units, should not be part of the gross revenue of legal entities that carry out real estate activities of land subdivision, real estate development, construction of buildings for sale, as well as the sale of real estate built or acquired for resale .
Therefore, given the existence of specific legislation for companies operating in the real estate sector and the understanding followed by the Brazilian Federal Revenue Service, companies operating in this type of activity should not include amounts relating to conditional discounts in the tax base.
Marcos Martins Advogados makes its tax team available to answer any questions you may have.
