The Higher Chamber of the Administrative Council of Tax Appeals (Carf) understood that Income Tax (IRPJ) and CSLL are not applicable to ICMS tax benefits, as long as they meet the accounting requirements provided for in the legislation. This is one of the first decisions made by the councilors after the Federal Revenue Service issued consultation solutions that restrict the non-incidence of taxes.
In the consultation solutions (Disit No. 1,009 and Cosit No. 145, both from the end of 2020, and Disit No. 6,028, published on Friday), the agency once again established that only ICMS benefits considered as a subsidy for investment (granted as a stimulus for the implementation or expansion of economic ventures) would escape taxation.
For the agency, if granted only to strengthen the companies' cash flow, without a specific purpose, the tax benefits should be considered a subsidy for costs and taxed by IRPJ and CSLL. Lawyers point out, however, that there are no limitations in Complementary Law No. 160 of 2017. The rule added paragraph 4 to article 30 of Law No. 12,973 of 2014 to establish that any incentive should be considered a subsidy for investment.
Before the enactment of the rule, there were many cases that discussed on a case-by-case basis whether the tax benefit could be excluded from the tax calculation basis or not. “This dichotomy generated a great deal of tax litigation. In many cases, there was discussion about whether [the incentive] could be classified as an investment subsidy. This was always done based on an analysis of the specific legislation for each ICMS benefit,” says Thiago Marigo, from Freitas Leite Advogados.
Starting in 2017, with Complementary Law No. 160, enacted to end the tax war between states, it was thought, according to the lawyer, that the problem had been solved. “Until the IRS itself changed its position, through Consultation Solution No. 145,” he says.
The economic impact of the discussion is considerable, says tax specialist Breno de Paula, partner at Arquilau de Paula Advogados. He points out that there are regional development programs spread throughout the country that can achieve reductions of up to 90% of ICMS.
A company with revenues of R$100 million, for example, would normally have to pay R$17 million in ICMS – taking into account a tax rate of R$171. With a benefit of R$901, this amount would drop to R$1.7 million. According to Carf, the difference of more than R$15 million should be deducted as an expense. The IRS understands, however, that everything can be taxed.
The case analyzed by the Superior Chamber concerns a pharmaceutical company. The majority of the counselors of the 1st Panel understood that what is determined by Complementary Law No. 160 of 2017 (case no. 13116.721486/2011-29) should be applied. The score was five votes to three.
According to the decision, the rule “removed the competence of federal tax inspection authorities and tax litigation judges themselves from analyzing local regulations and, consequently, from deciding whether a given state or district benefit, related to ICMS, is a cost subsidy or investment subsidy”.
In this case, the laboratory had joined the so-called Industrialization Participation and Promotion Fund (Fomentar), an incentive program through which the government of the State of Goiás granted interested legal entities a loan of up to 70% of the amount equivalent to the ICMS due, aiming to promote industrial activities. The program was created by State Law No. 9,489 of 1984 and regulated by Decree No. 3,822 of 1992.
In a second phase, State Law No. 13,436 of 1998 was enacted, which dealt with the early settlement of Fomentar financing contracts. Based on this rule, the laboratory benefited from a R$67.9 million discount, equivalent to R$881,400 of the original outstanding balance.
The rapporteur, counselor Luiz Tadeu Matosinho Machado, was defeated in the case. The vote of counselor Caio Cesar Nader Quintella, designated writer, prevailed. He took into consideration that the complementary law established that all ICMS benefits should be considered as a subsidy for investment and, therefore, should not be taxed.
According to him, paragraph 4 of article 30 “makes it clear that ICMS incentives and benefits granted are investment subsidies, and no other requirements or conditions can be required beyond those stipulated in article 30 itself”.
For tax specialist Breno de Paula, “the Superior Chamber of Tax Appeals gives effectiveness and concreteness to the legal command”. He adds that the case law of the Superior Court of Justice (STJ) and the Federal Supreme Court (STF) is already firm in the sense that tax benefits and bonuses cannot be included in the calculation basis of federal taxes.
Lawyer Maurício Faro, from BMA Advogados, states that this is a very important precedent for Carf “because it honors the spirit of the rule and rules out the application of the Revenue's consultation solution that attempted to regress to the understanding regarding the need for proof of the classification of the benefit”.
In a statement, the Federal Revenue Service said it does not comment on court decisions. The National Treasury Attorney General's Office (PGFN) had not responded by the time this edition went to press.