Companies get court orders to extend payroll-tax cut

Taxpayers have been winning provisional court orders to maintain payroll-tax cuts until December 31 of 2017. The program to lower the payroll burden, created in 2011, allowed some sectors to pay between 1.5% and 4.5% on gross revenue — the Social Security Contribution on Gross Revenue (CPRB) — instead of 20% on payroll.

It was beneficial to most taxpayers. But provisional measure (MP) 774, of 2017, extinguished the regime from July with the justification that it didn’t contribute to economic growth.

There are already preliminary court orders at least in the Federal District and the states of São Paulo, Rio de Janeiro and Rio Grande do Sul, making companies that obtained the right to stay in the regime for at least six more months save millions of reais. The government can appeal of those decisions.

In Congress, several sectors have been putting pressure to avoid the suspension of the payroll-tax-cut regime. The sponsor of MP 774, Senator Airton Sandoval (Brazilian Democratic Movement Party, PMDB, of São Paulo), may read his report at the joint committee analyzing the matter on June 23.

The main argument of the lawsuits is that Law 12,546, which instituted the payroll-tax-cut regime, establishes that companies can’t back down from their option to paying taxes over payroll or over gross revenue, with the option valid for the entire calendar year. This way, they argue that the end of the regime in the middle of the year goes against the legal security and the good faith of taxpayers.

Recently, a large call-center company won a writ of mandamus from the 21st Federal Civil Court of São Paulo. For the judge, “the non-retractable nature created by the legislator himself must be respected by both parties, under penalty of the legal security be violated. Therefore, the same way that it is forbidden to the taxpayer to alter the taxation regime during a certain year, in accordance to its convenience, the tax authority can’t, for the same reason, promote such alteration in the same year.” The judge thus defined that the alteration promoted by the MP can only affect the taxpayer from January 2018.

Otherwise, if these decisions didn’t secure the taxpayers’ right, it could create room for discussing in court the change of option of taxation regime by real profit for taxation by presumed profit, or vice-versa, throughout the year, since it would be a similar discussion. “These orders guarantee the legal security, the predictability, since companies made the option based on their annual planning. You can’t change the rule of the game in the middle of the year,” he says.

An agricultural cooperative also won an order from the 1st Court of Santa Cruz do Sul, Rio Grande do Sul. Judge Dienyffer Brum de Moraes stated that it is “unassailable the commitment to respecting the option made by the taxpayer until the end of the fiscal year, being inadmissible that the public power itself comes to violate it or modify it in the meantime, in respect to the good faith while specific projection of legal security value, essential to a state that aims to be the rule of law.”

Judge Charles Renand Frazão de Moraes, of the 2nd Federal Court of Brasília, also granted order to a manufacturer of aircraft. For him, “since article 9 of Law no. 13,161/2015 instituted that the option made by the taxpayer would be valid, in a non-retractable way, throughout the entire year 2017, the state couldn’t modify or revoke the period of enforcement for the taxpayer’s option, and consequently apply a new legal tax regime as it so wishes, exactly as it happens in the present case.”

Source: Valor Econômico