The Ministry of Finance announced, on 01.12.2023, a series of measures aimed at reducing the federal fiscal deficit. See below the most important points of these changes, regarding tax and procedural aspects.
PIS AND COFINS ON ICMS
Following the effects of the judgment of the so-called ” Thesis of the Century”, in which the Supreme Federal Court (“STF”) decided that the ICMS should not be included in the tax base of PIS and COFINS, the Federal Government issued the Provisional Measure No.1,160, to amend Laws 10,637/02 and 10,833/03, expressly providing that the ICMS must be excluded from the tax base of these contributions.
One point to note is that the new wording given by the Measure uses the expression “ICMS levied on the transaction”, instead of the term “ICMS stated on the invoice”, which used by the STF and was also adopted by the Federal Revenue Office in other legislation. This language, however, seems to be more comprehensive, reinforcing arguments in other discussions, such as the exclusion of “DIFAL” and ICMS-ST from the PIS/COFINS base.
However, the new regulation now provides, on the other hand, that the ICMS amounts incurred in the transaction will no longer be considered as credits, which will impact the total PIS/COFINS amount to be paid by taxpayers under the non-cumulative social contribution regime.
This adjustment in the calculation of PIS/COFINS credits will only be applicable as of May 1, 2023, since it involves an increase in the tax burden (anteriority rule).
In addition, this change may also be subject to judicial challenge, since the PIS/COFINS legislation continues to establish that the calculation basis for credits correspond to the value of the acquired asset, which is composed by the ICMS, as provided for in the complementary legislation.
NEW AMNESTY PROGRAM
The Attorney-General Office of the National Treasury (“PGFN”) together with the Federal Revenue of Brazil (“RFB”) published the Ordinance No. 1/2023 enacting the Tax Litigation Reduction Program (“PRLF”). This program establishes conditions for exceptional negotiations of tax debts in administrative litigation within the scope of the Federal Revenue Judgment Office (“DRJ”), the Administrative Council of Tax Appeals (“CARF”), and of small amounts in administrative litigation or outstanding debts.
The Ordinance No. 1/2023, considering the benefits already granted by the legislation, authorized the following modalities or negotiation:
|Debts under administrative litigation||Discount of up to 100% of the interest and fines + payment of 30%-48% in cash in up to 9 installments + use of NOL to offset the remaining amount.
Down payment of 4% of the debt + discount of up to 100% of the interest and fines (with limitations depending on the installments).
|Litigation of small amounts||Debts under 60 minimum wages (aprox. BRL 61k), involving individuals or small and micro legal entities.
Down payment of 4% of the debt + discount of 40%-50% of the remaining debt (with limitations depending on the installments).
In addition to the criteria already applied by the Treasury to determine the degree of recoverability of credits, the ordinance determines that tax credits in tax administrative litigation for more than 10 years will be considered irrecoverable.
A taxpayer can apply for the negotiation, through the electronic portal of the Federal Revenue, from February 1, 2023, to March 31, 2023.
CARF: VOLUNTARY DISCLOSURE AND RETURN OF THE CASTING VOTE
Also, Provisional Measure No. 1.160 was published, bringing two important provisions.
The first, concerns the possibility of confession and payment of debts not yet assessed, which is called “Denúncia Espontânea” (Voluntary Disclosure).
Although this option is already foreseen in the law (article 138 of the National Tax Code), the Measure allows it to be applied also to debts under tax inspections initiated until the date of its publication, if the payment is made by April 30, 2023. The IRS should regulate this matter.
The second, concerns the revocation of Section 19-E of Law No. 10,522/2002, which determined that in case of a tie in the CARF decisions, the result would be proclaimed in favor of the taxpayer. This favorable system for the taxpayer has been running since 2020 and had been causing losses to the Tax Authorities in sensitive matters. It seems that the Government’s intention is to avoid reversals of positions or decisions contrary to the Tax Authorities in future CARF trials.
Our Tax Team is at your disposal to clarify doubts about the matters above, as well as to assist you in the implementation of any measure that may be of your interest.