STF maintains repeal of corporate tax cuts – 05/08/2023 – Market

The STF (Federal Supreme Court) formed a majority to uphold the decision of retired minister Ricardo Lewandowski, who responded to a request by the Luiz Inácio Lula da Silva (PT) government for the validity of the repeal of the decree of the Jair Bolsonaro (PL) management that halved the tax rates paid by large companies.

Voting in full in favor of Lewandowski’s decision, until 6 pm this Monday (8), ministers Alexandre de Moraes, Dias Toffoli, Cármen Lúcia and Edson Fachin. Gilmar Mendes also followed Lewandowski’s vote, but presented occasional differences.

André Mendonça, minister appointed by Bolsonaro, disagreed with the decision.

The decree was signed by then vice-president Hamilton Mourão on the eve of the end of his term and displeased members of the new government. He had cut the PIS and Cofins rates in half on the financial income of these companies.

Shortly after taking office, Lula revoked the measure, which could have an impact of BRL 5.8 billion on revenues in the first year of the PT’s administration.

In a decision taken in March, Lewandowski determined that “the effectiveness of judicial decisions that, expressly or tacitly”, considered the revocation of the decree made by Lula invalid. Lewandowski retired from the Supreme Court in April.

“In its short term in the legal system, Decree 11.322/2022 was not applied to the specific case, as there was not even a business day to enable the earning of financial income —that is, as the taxable event did not occur, the taxpayer did not acquire the right to submit to the tax regime that never came into force”, said Lewandowski in his decision.

Non-cumulative regime companies pay a 9.65% PIS/Cofins rate on their revenues. This percentage drops to 4.65% when it comes to financial income —obtained with income from investments in the market, such as fixed income securities, in addition to interest charged from suppliers or discounts obtained by companies.

With the decree of the Bolsonaro government, the rate would be reduced to 2.33% as of January 1, 2023.

In a note, the Ministry of Finance said that the majority formed by the Supreme Court this Monday “highlights the need for transparency and responsibility in fiscal and tax management”.

“Actions aimed at changing the tax system must take into account the impact on public finances and taxpayers, always respecting the principles and rules established by the Constitution. The STF decision reinforces the commitment to the stability and integrity of the Brazilian tax system” , says the statement.