The discussion about the possibility of using PIS and Cofins credits on expenses resulting from the COVID-19 pandemic for companies, such as masks, hand sanitizer and items to provide employees with home office, has started to reach the Judiciary. And, so far, the results have been unfavorable to taxpayers. According to the Office of the Attorney General of the National Treasury (PGFN), there are five records of proceedings on the issue in its system and, in three of them, the taxpayers' requests were dismissed. Two others are appeals against the previous granting of an injunction.
According to the PGFN, there is no record of disputes of this kind that have reached the Administrative Council of Tax Appeals (Carf) in order to create a case law on the subject. Therefore, experts consulted by JOTA believe that, without decisions in the administrative court and in higher judicial instances, it is possible for the taxpayer to request credit and be successful.
The few court decisions on the matter were issued by the Federal Court of São Paulo. In one of them, the company AEA Distribuição e Comércio de Materiais Elétricos Ltda. claimed the right to classify expenses necessary to face the pandemic as input for PIS and Cofins credit, according to the understanding of the Superior Court of Justice (STJ) in REsp 1.221.170/PR.
The company reported in court that it implemented remote work systems, employee rotation systems, installation of alcohol gel dispensers, provision of masks, gloves, glasses and more thorough cleaning procedures, among other methods. It also stated that the measures generated extraordinary expenses and that it is already weakened by market uncertainties and the risk of an economic recession.
In its defense, the Union claimed that, in the present case, the expenses listed by the plaintiff do not belong to the context of the production process, since its activity is limited to the resale of finished goods. Therefore, the use of credits is not applicable.
In the ruling, Judge Sylvia Marlene de Castro Figueiredo understood that the payment made for expenses arising from the adoption of measures to contain the pandemic, as a way of preventing contagion in the workplace and maintaining economic activities, as well as to meet the health recommendations required by the competent authorities, cannot be considered input.
“The provisions of Laws No. 10,637/2002 and Laws No. 10,833/2003 cannot be interpreted extensively to ensure the author receives the credit as intended, since the hypotheses for excluding tax credits must be interpreted literally and restrictively, and do not allow for extensive interpretation, in light of art. 111, I, of the CTN [National Tax Code]”, wrote the judge.
In another lawsuit, filed by Forusi Forjaria e Usinagem Ltda, the taxpayer claimed that the coronavirus containment measures implied extraordinary expenses for the company, “which is already weakened by market uncertainties and the risk of an evident economic recession”. However, federal judge Raquel Fernandez Perrini denied the request.
According to her, “in general terms, when we talk about 'input', it is undeniable that there must be direct application in the production process and an intrinsic link between the good or service and the company's activity, which is not the case with expenses incurred to deal with the pandemic”. And she adds: “there is no way to generically adopt, as the author wants, that any and all expenses to deal with the pandemic be classified as input”.
Federal Revenue
When questioned by JOTA, the Federal Revenue Service reported that it does not have specific regulations on the subject, and there is no information on fines imposed on taxpayers who credited PIS and Cofins on products used to combat the pandemic. In a note, the agency reported that the Cosit normative opinion No. 5, from 2018, details what can and cannot be considered input for crediting purposes. “It deals with the issue of inputs in general, but it can perfectly be applied to products linked to the pandemic issue.”
The IRS also reported that the taxpayer may take credit if the product he/she purchased falls under the concept of input, according to the guidelines established in the opinion. “It should be noted that these guidelines are quite comprehensive, allowing credit in situations that the IRS considered impossible for some time. The opinion was issued in accordance with the decision of the STJ in a repetitive appeal on the subject of inputs.”
Use
Since this is a recent issue, potential controversies on the subject have not reached the Carf, so there is no case law on this crediting in the administrative court. And, even in the Judiciary, tax experts explain that decisions are still specific. Therefore, taxpayers who wish to take credits can do so, provided they meet certain conditions.
Pedro Lima, Carf advisor and author of the book “Use of Non-Cumulative PIS and Cofins Credit on Expenses Made in Pandemic Input Acquisitions” explains that for the credit to be accepted by the tax authorities, the company must follow two steps: first, it needs to prove the expenses and, second, demonstrate the essentiality and relevance, as defined by the STJ.
“And that is where a long analysis of this comes in, because it is an open concept, it is not an exhaustive list, so it depends on interpretation. The taxpayer needs to apply the concept of essentiality and relevance based mainly on Carf precedents”.
According to Pedro, the analysis of Carf's case law on situations outside the pandemic is important to assess whether the tax authorities will accept the use of PIS and Cofins credits on pandemic inputs. “Carf created a case law, an intermediate concept of input, which is a little broader than the concept of input used in IPI. In IPI, only raw materials, intermediate products and packaging materials are considered inputs. In PIS/Cofins, it goes further.”
Attorney Cassio Sztokfisz, from the Schneider and Pugliese law firm, explains that, since there is no specific regulation on the subject, companies can be fined, but he believes that crediting is possible. “Expenses resulting from a legal imposition can generate credit for PIS and Cofins. And what do we see? There was a declaration of a state of emergency by Congress, so there is a regulation stating that there is a period of emergency,” he says.
“The Labor Prosecutor's Office has been demanding that companies protect their employees from the disease, as they run the risk of receiving a work safety citation. According to regulatory standards, companies must provide masks, alcohol gel, thermometers, and ensure an unhealthy work environment. In our opinion, this is how taxpayers are entitled to take this credit,” he adds.
According to lawyers Diana Piatti Lobo and André Menon, partners at Machado Meyer, the Covid-19 pandemic is an extremely new situation and, therefore, potential conflicts on the subject may take time to reach Carf. They understand that commercial companies may have more difficulties in securing credit than industrial companies.
Tax experts argue that, given the exceptional nature of the pandemic, the IRS may adopt a less restrictive stance regarding the collection of PIS and Cofins credits than it has been doing currently. “The tax authorities tax revenue, and inputs are used to guarantee that revenue. And they are not only linked to the revenue of the producer of goods or the service provider; they are inputs for all those who are taxpayers for the purposes of collecting PIS and Cofins,” argues Lobo.
“Taxpayers can prove that it is essential that the government itself reduced taxation, and that it is essential that the government itself relaxed customs clearance rules to speed up the entry of these products into the country,” adds Menon. According to them, the decision to take credits or not should be analyzed on a case-by-case basis, depending on the company and its conditions.
Cases cited in the article: 5003996-98.2020.4.03.6110 TRF3, 5012198-94.2020.4.03.6100 TRF3