{"id":92681,"date":"2025-01-27T13:55:13","date_gmt":"2025-01-27T16:55:13","guid":{"rendered":"https:\/\/murray.adv.br\/?p=92681"},"modified":"2025-01-27T13:55:15","modified_gmt":"2025-01-27T16:55:15","slug":"majority-of-rulings-favor-taxpayers-in-disputes-over-fiscal-incentives","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/majority-of-rulings-favor-taxpayers-in-disputes-over-fiscal-incentives\/","title":{"rendered":"Majority of rulings favor taxpayers in disputes over fiscal incentives"},"content":{"rendered":"\n
Survey shows taxpayers in Brazil won 58% of court rulings involving the new Subsidy Law in 2024<\/em><\/strong><\/h6>\n\n\n\n

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01\/27\/2025<\/p>\n\n\n\n

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Brazilian courts have shown greater support for taxpayers in disputes over the taxation of ICMS (Tax on the Circulation of Goods and Services) fiscal incentives. A survey conducted by the law firm Mattos Filho found that, between January and October 2024, companies prevailed in 58% of the 614 first- and second-instance rulings related to the new Subsidy Law (No. 14,789\/2023).<\/p>\n\n\n\n

The legislation, which came into effect in 2024, changed the rules to impose corporate income tax (IRPJ), social contribution on net profits (CSLL), and social taxes PIS\/COFINS on all types of fiscal incentives granted by states and Bras\u00edlia (Federal District).<\/p>\n\n\n\n

The issue is significant for the federal government. However, with the judiciary\u2019s rulings\u2014most of which involve ICMS presumed credits\u2014the revenue collection has reportedly fallen short of expectations. Initially, when the government proposed provisional presidential decree (MP) No. 1,185\/2023, the predecessor to the Subsidy Law, it projected a R$35.4 billion increase in annual revenue. This estimate was later reduced to R$26.3 billion when the law was submitted to Congress.<\/p>\n\n\n\n

In response to a Freedom of Information Act request, Brazil\u2019s Federal Revenue Service told Valor that it cannot determine the exact amount collected from ICMS subsidy taxation. However, it cited a technical note from the Center for Tax and Customs Studies (CETAD) estimating that the federal government loses approximately R$80 billion annually due to allegedly improper exclusions of state and Federal District incentives from federal tax bases.<\/p>\n\n\n\n

According to the note, these exclusions increased by more than 40% after 2017, following the enactment of Complementary Law No. 160 and a ruling by the Superior Court of Justice (STJ). In that decision, the court allowed presumed credits to be excluded from IRPJ and CSLL bases (EREsp 1517492).<\/p>\n\n\n\n

The technical note also states that approximately R$2 trillion in state-level incentives were granted to companies between 2020 and 2022. Alongside the financial impact, the Federal Revenue Service highlighted a rise in legal disputes: nearly half of the injunctions filed against it in June 2023 addressed this issue.<\/p>\n\n\n\n

Court rulings<\/strong><\/p>\n\n\n\n

In the judiciary, the trend leans in favor of taxpayers. When focusing specifically on presumed credit cases, the rulings are even more favorable: out of 596 cases, 371 were decided for the taxpayers (62%). The only Federal Regional Court (TRF) predominantly siding with the government is the 4th Region, which covers southern Brazil. There, only 36 out of 130 first- and second-instance rulings supported the companies\u2019 arguments (28%).<\/p>\n\n\n\n

These rulings have benefited at least 260 companies across various sectors, including Apple, Raia Drogasil, Tommy Hilfiger Brasil, Camil, Nestl\u00e9, Pepsi, Johnson & Johnson, E-Vino, and Mobly. The survey conducted by Mattos Filho mapped injunctions, judgments, and decisions in six federal judicial regions. Some rulings encompass all fiscal incentives, while others are limited to presumed credits, depending on the taxpayer\u2019s request. In some cases, tax liabilities\u2014IRPJ\/CSLL and PIS\/COFINS\u2014are addressed separately.<\/p>\n\n\n\n

The distinction is significant. Tax attorneys explained the presumed credit argument is stronger than those for other incentives due to STJ precedents. In 2017, the STJ ruled that IRPJ and CSLL could not be levied on presumed credits as doing so would violate the federal pact. In 2023, the STJ examined whether this understanding could be extended to other fiscal benefits, such as base reductions, and concluded it could not.<\/p>\n\n\n\n

The court considered accounting effects: presumed credits represent a \u201cpositive inflow\u201d for companies, whereas other incentives, such as tax base reductions, reflect “negative benefits.” To exclude the latter from taxation, companies must meet legal requirements outlined in Article 30 of Law No. 12,973\/2014 (Topic 1182).<\/p>\n\n\n\n

Following this ruling, the new Subsidy Law (No. 14,789) was enacted, repealing Article 30 and equating all incentives as \u201cinvestment subsidies.\u201d Companies now must register with the Federal Revenue to claim a tax credit of up to 25%.<\/p>\n\n\n\n

In response, many companies turned to the judiciary. The diverse rulings suggest that courts may need to establish new legal precedents. \u201cSome issues remain unresolved, and many rulings do not align with the STJ\u2019s understanding. Although it\u2019s a past issue, discussions persist despite the new law,\u201d said Ariane Guimar\u00e3es, a partner at Mattos Filho. \u201cThis year, the STJ may revisit the topic given the speed of rulings.\u201d<\/p>\n\n\n\n

Ms. Guimar\u00e3es said there is resistance among courts to apply the STJ\u2019s decisions. \u201cThe TRF-4 believes that the presumed credit ruling does not apply to granted credits, even though they are essentially the same,\u201d she said. For both arguments, Ms. Guimar\u00e3es added, there are strong points in favor of taxpayers, though the presumed credit argument is stronger.<\/p>\n\n\n\n

Ms. Guimar\u00e3es emphasized that the STJ\u2019s prior ruling deemed presumed credits non-taxable for IRPJ and CSLL purposes. \u201cIt would be consistent for the STJ to uphold its jurisprudence. Presumed credits retain the same characteristics, and the new law cannot retroactively create a taxable event inconsistent with the Federal Constitution.\u201d<\/p>\n\n\n\n

The Federal Supreme Court (STF) will also rule on the matter in three cases. One broadly addresses excluding PIS\/COFINS from the ICMS presumed credit base (Topic 843), while the others challenge the Subsidy Law\u2019s constitutionality (Direct Actions of Unconstitutionality 7751, 7604, and 7622).<\/p>\n\n\n\n

Maria Andr\u00e9ia dos Santos, a partner at law firm Machado Associados, said she expected taxpayer arguments to gain more traction in the TRF-2, which covers Rio de Janeiro and Esp\u00edrito Santo. \u201cTaxpayers have a slight advantage, but it\u2019s not overwhelming,\u201d she said. \u201cWe expected better outcomes regarding presumed credits, given the favorable STJ ruling.\u201d<\/p>\n\n\n\n

Ms. Santos noted that taxpayer victories have impacted government revenue, which initially projected R$35.4 billion in additional revenue from subsidy taxation\u2014a figure revised downward over time. By November 2024, total IRPJ and CSLL collections amounted to R$10 billion, according to the Federal Revenue Service.<\/p>\n\n\n\n

\u201cSeveral economic sectors have grown, boosting revenue, but many companies turned to the judiciary, and the rulings favor taxpayers,\u201d Ms. Santos said, adding that she hopes the STJ will reaffirm its jurisprudence. \u201cIt\u2019s not just an expectation\u2014it\u2019s essential for legal certainty. There can\u2019t be a shift in position without any material change, as legislative amendments alone cannot override\u201d constitutional principles, she noted. \u201cThe federal pact remains in force.\u201d<\/p>\n\n\n\n

Valor contacted the Office of the Attorney General of the National Treasury (PGFN), but it did not respond before publication.<\/p>\n\n\n\n

*By\u00a0Marcela Villar\u00a0\u2014 S\u00e3o Paulo<\/p>\n\n\n\n

Source: Valor International<\/p>\n\n\n\n

\nhttps:\/\/valorinternational.globo.com\/\n<\/div><\/figure>\n","protected":false},"excerpt":{"rendered":"

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