Law on PIS/Cofins credit generates debate in the Judiciary – 09/02/2023 – Market

Large companies have obtained victories in the Judiciary against the law sanctioned by the Luiz Inácio Lula da Silva (PT) government, which excluded the ICMS, a state tax, from the basis for calculating credits for the abatement of federal PIS/Cofins contributions.

The controversy is linked to the so-called “thesis of the century”, and the expectation of tax experts is that the dispute unfolds through several instances until it reaches the STF (Federal Supreme Court) again.

The law sanctioned in May is part of the fiscal adjustment package announced in January by the Ministry of Finance, which projected additional revenue of R$ 32 billion in seven months for 2023 with the measure. $58 billion.

In less than three months after the law came into force, taxpayers obtained about ten (provisional) injunctions in the first and second instances to temporarily suspend the application of the change in the calculation. Some courts, however, have denied taxpayers’ requests.

In the understanding of the Ministry of Finance, if the PIS/Cofins cannot be levied on the ICMS for federal collection purposes, as defined by the STF in the thesis of the century, the credits of contributions generated by the acquisition of inputs cannot be computed in this way either.

In the explanatory memorandum of the provisional measure that dealt with the subject, the government also argues that, if inclusion persists, taxpayers may accumulate credits, causing an emptying of the collection of contributions destined for social security.

Although the reasoning makes sense from an economic point of view, tax specialists say that there are legal obstacles to this understanding and that the new legislation is unconstitutional. The way in which the MP that gave rise to the law was processed is also questioned.

In a lawsuit filed by the Henares Advogados law firm, a company in the metallurgical sector obtained a preliminary injunction in the first instance for the taxes to be collected as was done before the enactment of Law 14.952/23.

The Demarest Advogados law firm has about 30 lawsuits on the subject and obtained about 10 decisions favorable to taxpayers, including sectors such as agribusiness, telecommunications and industry.

The PGFN (Attorney General of the National Treasury) states that the discussion involving the subject has been recurrent in the courts, and that one cannot speak of the existence of a consolidated position at the moment.

“It should be noted that numerous favorable decisions were granted to the National Treasury”, says the institution, highlighting the position of second instance of the TRFs of the 2nd and 3rd region.

“In relation to the unfavorable decisions, the PGFN informs that it has been presenting the appropriate resources and strongly trusts in their reversal in the courts.”

One of the main arguments used by lawyers is that the new legislation violates the PIS/Cofins non-cumulative rules, as the credit does not necessarily need to be linked to the contribution effectively collected in the previous stage of production, as occurs in the acquisitions of suppliers that are in the Simple or presumed profit.

Furthermore, according to tax experts, the fact that ICMS is not a supplier’s income (and therefore PIS/Cofins cannot be levied on this tax), does not mean that it is not an expense for the buyer.

“The argument that we have seen being more accepted is that of the judgment of theme 69 [tese do século no STF] credit restrictions do not automatically follow. The STF talked about revenue, and the discussion we have here is about expenses. They are different things”, says Maurício Barros, partner in the tax area at Demarest Advogados.

Tax expert Halley Henares Neto claims that the Supreme Court decided that ICMS is not part of the PIS/Cofins calculation base because it cannot be taxed on tax at the time the company sells the goods. That is, the tax cannot be taxed as if it were income.

According to him, the discussion in this case is different, because when the company acquires raw materials and inputs, it is not discussing the concept of revenue, but the concept of non-cumulativeness.

Taxpayers also question the rite of passage of the new rules in Congress.

Law 14.592/23 originated from a provisional measure issued in the past government and which initially dealt with benefits to the event sector and airline companies.

The changes to the PIS/Cofins were part of another MP, edited by the Lula government, but were incorporated into the text that had been in Congress since 2022. Therefore, lawyers have argued that it is a “jabuti” or “legislative contraband”.

The government tried to do something similar to unify the MP for taxation of investments abroad and the minimum wage, but withdrew after pressure from congressmen.

The PGFN understands that, based on the jurisprudence of the STF, the articles of the law that deal with the subject have re-dimensioned not only the basis for calculating contributions from the perspective of charging the tax, but also from the point of view of the healthiness of the non-cumulative technique and of the social security budget balance, excluding the possibility of deducting credits calculated in relation to the ICMS levied on the acquisition operation, without any damage to the principle of legality.

Marcelo Salles Annunziata, partner in the tax area at Demarest Advogados who works on some of these cases, says that the matter should reach the higher courts so that there is a unified understanding on the issue.

“It could be a discussion that will last a long time in the Judiciary, possibly reaching the Supreme Court, to analyze these constitutional aspects. Some even compare it with a new thesis of the century”, says Annunziata.

Understand

• Calculation basis: In May, Lula signed a law that excluded the ICMS, a state tax, from the calculation base for credits to deduct federal PIS/Cofins contributions
• Revenue: projection for the 2024 Budget is that the measure will result in revenue of BRL 58 billion
• Contestation: taxpayers have obtained injunctions (provisional) in the first and second instances to temporarily suspend the application of the change in the calculation
• Pendency: The expectation of tax experts is that the dispute unfolds through several instances until it reaches the STF again