ICMS: Government victory at STJ may yield less – 06/12/2023 – Market

The STJ (Superior Court of Justice) published this Monday (12) the judgment of a billionaire judgment on the possibility of companies excluding gains with ICMS tax benefits from the IRPJ/CSLL calculation base, federal taxes that affect profit . This exclusion allows companies to reduce their taxation.

According to the decision of the STJ, which applies to all actions on the subject, the law allows the deduction, provided that the requirements set forth in Complementary Law 160/2017, which dealt with the tax war between states, are met.

For the court, this law determined that proof that the incentives were used as a stimulus to investment (implementation or expansion of economic undertakings) cannot be required. This part of the decision goes against an understanding of the Federal Revenue on the issue that generated a series of assessments.

According to the ministers of the STJ, even without this proof, there is still a need to register these amounts in a profit reserve account, which means that the gain generated by the benefit cannot be distributed to shareholders. The amounts must be, accounting, in a tax incentive reserve.

“In general, the companies already observed the conditions foreseen in the law. The cases in which the taxpayer did not constitute this reserve are exceptional”, says the tax specialist Telírio Saraiva, a partner at Trench Rossi Watanabe.

Saraiva says that companies can, and have been doing since the result of the judgment, the accounting reclassification of profits to constitute the tax incentive reserve. This can also be done in relation to earnings from previous periods, provided that the earnings have not been distributed, even if the amounts are in another heading.

According to the tax expert, there were few companies that recorded an expectation of loss on these actions after the result of the judgment ended in April, which indicates that the financial impact for these taxpayers may be more limited than estimated by the government.

After the judgment, Minister Fernando Haddad (Finance) stated that, with the decision, a provisional measure would no longer be necessary to change the legislation on the subject.

“This decision pacifies the issue”, said the minister in April. “These people are evading a tax. There’s no other word. They have to go back to paying what they’ve always paid.”

The government’s expectation at the time was an extra collection of R$ 70 billion to R$ 90 billion with the decision, which would facilitate the economic team’s plan to raise revenues by up to R$ 150 billion per year to reduce the public debt.

Halley Henares, president of Abat (Associação Brasileira Advocacia Tributária) and partner at Henares Advogados, also states that most companies were already framed in the legislation, keeping profits in a reserve, and that the accounting adjustment is just a recommendation to more transparency to the numbers.

“It became clear that the size of the gain [para a União] It is much smaller than imagined. No distinction was made between subsidy for funding or investment. It is enough for the value to be used in a capital reserve account and not distributed to the partner to be excluded from the calculation base”, he says. “Many restrictions placed over time by consultation solution by the Revenue have fallen to the ground.”

Henares also recalls that the STF (Federal Supreme Court) has already removed its competence to analyze the issue.

STF Minister André Mendonça even suspended the effects of the judgment because he understood that this case was related to a PIS/Cofins and ICMS issue analyzed by the Supreme Court, but he revised his position and considered the result valid.

Luiz Alfredo Bianconi, a tax specialist at Bianconi Advocacia e Consultoria Jurídica, also claims that the victory was not complete, as disclosed by the Ministry of Finance, and that the STJ judgment puts an end to the dispute.

In the two concrete cases analyzed by the STJ and which now serve as a reference for others in the Judiciary, the justices determined that the actions should be returned to the original instances, in order to verify compliance with the conditions and requirements provided for by law.

The judgment dealt with all ICMS tax benefits, except the presumed credit of this state tax, an issue that had already been decided in 2017 unfavorably to the Union.

In the thesis set out now, the understanding applies according to which “although it cannot be required to prove that the incentives were established as a stimulus to the implementation or expansion of economic enterprises, the need for registration in the reserve of profits and limitations persists correspondents, as expressly provided by law”.

It was also determined that the waiver of this proof does not prevent the Federal Revenue from charging taxes if it is verified that the amounts arising from the benefit were used for purposes other than guaranteeing the viability of the economic enterprise.