Brazil: Newsletter – April/22 | Tax Law

SUPERIOR COURT OF JUSTICE TO ANALYZE THE EXCLUSION OF ICMS-ST FROM THE CALCULATION BASIS OF PIS/COFINS

The 1st Section of the Superior Court of Justice (STJ) included the Special Appeals 1,896,678 and 1,958,265 in the trial list under the repetitive appeals procedure. Thus, the decision will have binding effects on all taxpayers and must be applied by the other judges and courts.

Up until now, taxpayers were expecting that the Supreme Court would analyze this matter, given the similarity to the discussion of the exclusion of the ICMS (due by the taxpayer itself) from the PIS/COFINS basis (the ICMS-ST is paid by the importer or manufacturer for the entire consumption chain, based on statutory margins).

In a recent decision, however, the Supreme Court dismissed the matter, understanding that it would not involve sufficient constitutional grounds.

The STJ judgment is relevant because several sectors of the economy are subject to ICMS-ST and may be affected by this trial.

SUPERIOR COURT OF JUSTICE RULED ON THE TAX ON REAL ESTATE TRANSFER (ITBI) CALCULATION BASIS

The 1st Section of the Superior Court of Justice (STJ) decided that the ITBI (Property Transfer Tax) calculation basis is not bound to the IPTU (Tax on Real Property) basis, but rather should consider the market value of the property.

In addition, the Court decided that the public administration cannot previously define the ITBI calculation basis based on a reference value - a kind of prior unilateral listing of values of properties.

For the Court, the ITBI calculation basis must be defined pursuant to the value of the transaction declared by the taxpayer himself, which is presumably the market value. If the tax authorities do not agree with the amount, there must be an administrative procedure to define the new amount through due process.

The winning vote considered that, in the case of ITBI, there is an underlying legal transaction, and the value is defined based on a series of factors, including the condition of the property, improvements made by the owner and the seller's and buyer's personal interests at the time of the sale. Thus, the value of the transaction must be declared by the taxpayer (and not previously issued by the tax authorities) and can only be disregarded if there is evidence that it does not match the property's market value.

SUPREME COURT TO RULE ON THE LEGITIMACY OF FINES THAT EXCEED THE AMOUNT OF THE TAX DUE

The Supreme Federal Court (STF) recognized the general repercussion of an Extraordinary Appeal regarding the possibility of setting a punitive tax fine, when there is no evasion, fraud, or collusion in the case, in an amount higher than 100% of the tax due. This judgment will have binding effects on other cases on the same matter.

In the lawsuit, the State of São Paulo argues, among other points, that reducing the fine imposed on the taxpayer would lead to the iteration of illegal conduct; and that the debate on the percentage of the punitive fine interferes with the independence and the autonomy of the states to legislate on taxes within their competence.

For Justice Luiz Fux, president of the STF, the Supreme Court must define the parameters for the maximum limit of the punitive tax fine, specifically when the amount is higher than 100% of the tax due.

SUPERIOR COURT OF JUSTICE DENIES THE TAXPAYER'S RIGHT TO PAY SOCIAL SECURITY CONTRIBUTION ON GROSS REVENUE (CPRB) DURING THE YEAR 2018

The judges of the 2nd Panel of the STJ dismissed the appeal of a taxpayer who claimed the right to collect the social security contribution on gross revenue (CPRB) during the 2018 financial year.

The company argued that law 13,670/2018 would have changed the CPRB's regime, by excluding several economic sector eligible for such tax scheme, "regardless of the irreversible option made by the taxpayer", significantly increasing the company's tax burden.

The Court found that the legal requirements for the revocation of the benefit were followed and there was no illegality, given that it only covers future events and does not offend the constitutional principle of non-retroactivity.

SUPREME COURT RULED ON PIS AND COFINS ON AMOUNTS PAID TO CREDIT CARD ADMINISTRATORS

The STF Plenary concluded the judgment of Extraordinary Appeal no. 1,049,811 (Item 1,042 of general repercussion), defining the constitutionality of the inclusion of amounts withheld by credit/debit card administrators in the PIS and COFINS calculation basis owed by a company that use such services in their sales.

The discussion had already been held in September 2020, when the Court defined that the amounts that companies pass on to debit and credit card administrators (as a commission) are part of the PIS/COFINS basis owed by merchants.

Now, the Court defined the thesis by a majority of votes. The Reporting Justice Alexandre de Moraes understood that the operational costs of merchants and service providers, such as the commission withheld by the card administrators, are part of the companies' revenues. Thus, the claim that such amounts are passed on to third parties would not be sufficient to exclude them from the PIS/COFINS levy.

SUPERIOR COURT OF JUSTICE RULED ON THE ATTORNEY'S FEE DUE BY THE TREASURY IN CASES OF HIGH VALUE

The Superior Court of Justice concluded the judgment of Item 1,076 of repetitive appeals which discusses the parameters of condemnation of the Treasury in attorney's fees to the winning party, when the case involves high values.

The Treasury argues that the parameters brought by the 2015 Code of Civil Procedure would cause injustice and a high burden to the Government in specific situations when the amount involved in the case is too high, defending that the judge would have the authority to freely establish the amount of condemnation in such cases.

In his vote, however, the reporting Judge Og Fernandes explained that the 2015 Code brought more objectivity to the calculation of such fees and that the rule of fees for equity, provided for in paragraph 8 of section 85 was designed for exceptional situations in which the economic benefit is irrelevant or inestimable, or the value of the case is very low, but not in case the amounts involved is of a high value.

KLA conducted one of the lawsuits judged on this occasion, which represents a milestone in the procedural relations between taxpayers and tax authorities in Brazil.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.