After agreement, Chamber approves MP for subsidies and changes to the JCP

The Chamber of Deputies approved this Friday (15) the conversion into law of provisional measure (MP) 1,185/2023, which defines new rules for the taxation of companies benefiting from subsidies and for the use of Interest on Equity (JCP) . The proposal is the Ministry of Finance’s main bet to increase federal revenue and pursue the fiscal target of zeroing the primary deficit next year.

The vote was put on the agenda after an agreement between the government and the Legislature. On Wednesday (13), the President of the Chamber, Arthur Lira (PP-AL) met with the President of the Republic, Luiz Inácio Lula da Silva (PT), who would have accepted the overturn of a series of vetoes in exchange for approval , later this year, of the MP and the proposed amendment to the Constitution (PEC) for tax reform.

The score was 335 to 56, with one abstention, in the vote on the MP, which now needs to be analyzed by the Senate plenary. The approved version, however, has several changes in relation to the government text, published in the Official Gazette of the Union (DOU) at the end of August.

Novo and PL presented requests to remove the topic from the agenda and postpone the assessment, respectively, but the requests were rejected, in order, by 307 to 32, with two abstentions, and by 331 to 42, with one abstention. Deputies are still analyzing highlights of the text.

In general terms, MP 1,185 provides that companies taxed on real profit and that have ICMS tax incentives from state governments for investment purposes will receive IRPJ tax credits instead of deducting exemptions from the IRPJ and CSLL calculation base. , as occurs today. Furthermore, it allows the Union to tax subsidies that are used only for funding and are not linked to investment.

Among the changes promoted by the rapporteur of the matter, deputy Luiz Fernando Faria (PSD-MG), are the extension of the period for subsidies subject to the benefit, the reduction of the period for the Revenue to analyze the eligibility of companies and the extension of the possibility of generating tax credits for the goods and services trade sector.

Faria also increased the maximum discount that can be given to companies in negotiations for amounts not collected in recent years to 80%. The Ministry of Finance had proposed a reduction of up to 65% during negotiations with Congress to unlock the vote on the MP.

Initial estimates indicated that the changes promoted by the text could generate R$35 billion in additional revenue in 2024, which would help with the challenge of closing public accounts in balance, as dictated by the fiscal target. According to the Minister of Finance, Fernando Haddad, the projection remains unchanged, despite legislative changes.

The approved text also changes rules on the use of JCP, meeting another of Haddad’s demands. The instrument is a form of distribution of profits among shareholders that can be treated as an expense in the company’s results. Therefore, it is used by companies to reduce the IRPJ and CSLL tax base, generating less revenue for the Union.

The Minister of Finance’s intention was to extinguish the mechanism or end its deductibility from federal taxes. The rapporteur’s proposal in the Chamber, however, maintains the possibility of deduction, but limits what can be considered for JCP purposes.

According to the opinion approved in the plenary session, only resources referring to the paid-in share capital (transferred to the company’s activities), capital and profit reserves provided for by the law of Joint Stock Companies (SAs), in addition to of treasury shares and the amount referring to the recorded profit.

Positive variations in net equity resulting from corporate acts between dependent parties that do not involve the effective transfer of assets to the legal entity are no longer considered.