Brazil’s Supreme Court (STF) rules to exclude presumed ICMS credits from the PIS and Cofins tax base.

The decision represents an important victory for taxpayers who benefit from state tax incentives.

What was decided?

The Brazilian Supreme Court (STF) ruled that amounts corresponding to presumed ICMS credits do not constitute company revenue or turnover for the purposes of PIS and Cofins taxes .

The thesis established by the Supreme Court states:

“The inclusion of presumed ICMS credits in the tax base for Cofins and PIS contributions is incompatible with the Federal Constitution.”

The discussion revolved precisely around the legal nature of these credits: on one side, the Federal Government argued that the benefit represented an economic advantage incorporated into the company’s assets; on the other, taxpayers maintained that it was a tax incentive aimed at reducing the state tax burden, and not revenue derived from business activity.

The second position prevailed.

What is the impact on businesses?

In practice, companies that currently include presumed ICMS credits in the calculation basis for PIS and Cofins should evaluate the possibility of ceasing to subject them to taxation , observing the regulations and the specific situation of each taxpayer.

Furthermore, the decision may represent an opportunity to recover amounts unduly collected in the past , provided that the legal requirements applicable to the specific case and the respective statute of limitations are observed.

It is important to highlight that the Supreme Court’s decision should not be confused with the ruling on Topic 69 , which dealt with the exclusion of ICMS (Value-Added Tax) from the PIS and Cofins (federal social security contributions) tax base. In Topic 843, the controversy specifically involves presumed ICMS credits arising from tax incentives granted by the States and the Federal District .

Recommendation

Given the economic importance of the decision, we recommend that companies that have or have had ICMS tax incentives in the form of presumed credit conduct an individualized analysis of their situation.

This analysis may include:

Identification of the presumed ICMS credits used by the company;
verification of how these values ​​are being treated in the calculation of PIS and Cofins;
a survey of any amounts that may have been taxed in recent periods;
assessment of the existence of recoverable credits;
Analysis of the best strategy for implementing the Supreme Court’s decision and potential recovery of amounts unduly paid.

Our tax team is available to conduct this assessment and determine if the Supreme Court’s decision could represent a concrete opportunity for tax savings and credit recovery for your company .