Justices rule multi-billion impact disputes over PIS, Cofins, Funrural, Difal-ICMS

12/12/2022

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Ricardo Lewandowski — Foto: Carlos Moura/SCO/STF

A package of tax disputes that represent a significant impact on federal government and state accounts is being decided by the justices of the Federal Supreme Court (STF) this week. There are almost R$150 billion under discussion. Financial institutions, agribusiness, and retail companies are the most impacted by the trials, which are expected to end on Friday.

It is at stake R$115 billion in one of the cases analyzed, related to the collection of social taxes PIS and Cofins from financial institutions, which will have a general impact — meaning that their ruling applies to all similar cases.

At the beginning of the trial, on Friday, the rapporteur, Justice Ricardo Lewandowski, accepted the thesis of banks and brokerage houses that they were entitled to collect, between 1999 and 2014, the contributions on a lower basis than that claimed by the federal government.

The discussion, which has been awaiting definition for more than a decade is whether the National Treasury can demand contributions on financial revenues — on interests, for example. Banks argue that they should only collect taxes on revenues from the provision of services, the sale of goods, or a combination of the two. This would be the case of those generated with the payment by customers for checkbook issuance, current account maintenance, and transfers, for example.

Since Bill number 12973 of 2014, which provided for social taxes PIS and Cofins taxation on all revenues from business activity, the dispute has been stalled. A year before the bill, the government opened an installment program for tax debts (Refis) to try to eliminate this liability and end judicialization.

According to lawyers, banks joined the program en masse because of the possibility of paying the taxes due with a waiver of fines and interest. In exchange, they would give up their lawsuits.

In his 11-page vote, Justice Lewandowski proposed the following thesis to be applied to all similar cases: “The concept of revenues as a tax base for the collection of social taxes PIS and Cofins, against financial institutions, is the revenue from banking, financial and credit activities arising from the sale of products, services or products and services, until the onset of Constitutional Amendment 20/1998.

The conclusion is based especially on two decisions of the STF. The first, in 2005, the Court declared unconstitutional paragraph 1 of article 3 of Law 9718 of 1998. This provision established as gross revenue “the totality of the revenues earned by the legal entity, being irrelevant to the type of activity performed by it and the accounting classification adopted for the revenues.”

At the time, the Supreme Court interpreted “gross revenue” and “billing” as synonyms, the latter referring to the sale of goods, services, or goods and services (Extraordinary Appeal [RE] 346.084).

In the second decision considered by Justice Lewandowski, the STF understood as a consumer any individual or legal entity that uses, as the final recipient, banking, financial, and credit activities (action of declaration of unconstitutionality [ADI] 2591).

“As a result of these understandings the financial institutions offer products or services, whose revenues are part of the concept of billing, again, even if they do not require the issuance of an invoice,” said the rapporteur. The other Justices are yet to give their opinions (REs 609096, 880143, and 1250200).

Another dispute in progress this week and with a multi-billion impact is about Funrural, which is the Rural Workers’ Assistance Fund, the social security contribution for the agribusiness sector.

There are three lawsuits under analysis. One of them discusses whether there is an obligation to pay Funrural (ADI 4395). Interrupted in May by a request for examination, the virtual trial resumed on Friday. The score is six votes to five to uphold the constitutionality of the contribution but rejects the obligation of the individual rural producer to pay the tax in sales operations to legal entities.

In the other lawsuits, the dispute is over Funrural’s tax base — whether it is the gross revenue from production, or the remuneration paid or credited to insured employees. The impact of both is R$24 billion and affects agribusinesses (RE 611.601) and rural business entities (RE 700.922).

In the first case, the rapporteur justice Dias Toffoli validated the social security contribution levied on gross revenue from the sale of production.

In the appeal involving business entities, in turn, there are four votes with distinct opinions. The retired Justice Marco Aurélio Mello, which used to be the case’s rapporteur, ruled for the unconstitutionality of the social security contribution levied on the gross revenue from the commercialization of production, payable by rural employers who are legal entities. Justice Edson Fachin followed him.

Justice Alexandre de Moraes, however, opened the divergence. He understood as constitutional the contributions due to social security by the employer, a business entity that is engaged in rural production levied on the gross revenue from the sale of its production. Justice Dias Toffoli partially followed that understanding.

The justices are also analyzing a crucial issue for the state’s cash flow. It is the dispute over the collection of the ICMS rate differential, the so-called Difal. By reopening the trial on Friday, Justice Gilmar Mendes reduced the advantage of the companies over the states. The score, with his vote, is five votes to three.

The justices are deciding on the starting date of the collections. If the states could have demanded the payment of the Difal in 2022, or if the collections will only start in 2023. This time difference, although short, has a high cost. States estimate that they will lose R$9.8 billion without the Difal in 2022.

Representatives of the companies, especially in retail — the most affected sector — say that an unfavorable decision can generate debt because until now companies have sold goods without considering the payment of the tax, which resulted in lower prices to the consumer.

If the collection is authorized, they say, in addition to carrying the loss of sales in a lower value, they risk receiving a tax-deficiency notice and having to pay the Difal since January, adjusted by the Selic, Brazil’s benchmark interest rate, plus a 20% interest for late payment.

Difal is used to divide the ICMS tax collection from e-commerce between the company’s state of origin and the consumer’s state. The company pays the interstate rate — 7% or 12% (depending on the location) — to the state where it is located, and the Difal, to the destination state.

*By Bárbara Pombo, Adriana Aguiar, Joice Bacelo — São Paulo, Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/