Fábio Bernardo
Lawyer at Marcos Martins Advogados
The Federal Supreme Court included one of today’s most important tax cases on its agenda for the 18th. This is a discussion on the scope of the constitutional principle of non-cumulative taxation for PIS and COFINS.
The non-cumulative nature of these contributions is one of the most controversial issues in Brazilian tax law. The system for calculating PIS and COFINS on a non-cumulative basis was introduced into the legal system by Laws 10.637/02 and 10.833/03.
These laws imposed a series of restrictions on the possibility of taxpayers taking credits when purchasing goods, services and paying expenses in general.
There have been recurrent administrative and judicial discussions about the concept of inputs for credit purposes, the possibility of discounting credits on financial income, among others.
Constitutional Amendment 42/2003, which included paragraph 12 in article 195 of the Federal Constitution, established that ordinary legislation could only define the sectors of economic activity for which social contributions levied on revenue would be non-cumulative.
Given this constitutional provision, the companies argued that ordinary legislation could not limit the full scope of non-cumulative taxation, but only define in which economic sectors the non-cumulative system would apply.
The discussion reached the Supreme Court through Extraordinary Appeal No. 841.979/PE, with Justice Dias Toffoli as rapporteur. The general repercussion of the discussion was recognized, which means that the decision to be handed down by the court will apply to all Brazilian taxpayers.
If the STF rules in favor of taxpayers, it is possible to say that any expense that contributes to generating revenue would be eligible for PIS/COFINS credits, opening up a huge range of possibilities for reducing companies’ tax burden and recovering taxes.
Faced with this situation, it is important for each taxpayer to assess the advisability of filing a lawsuit seeking full non-cumulative taxation of PIS and COFINS, considering, among other things, the possibility of the STF modulating the effects of any favorable decision, restricting the refund of amounts unduly paid in the last five years only to taxpayers who filed a lawsuit before the ruling of the leading case.
