GOOD FAITH DOES NOT PRECLUDE TAX FRAUD IN SUCCESSIVE SALE OF PROPERTY ACCORDING TO SUPERIOR COURT OF JUSTICE
The Superior Court of Justice (STJ) judged the Special Appeal No. 1820873/RS, which deals with fraud against tax execution in the successive sales of a property, that is, whether a third-party buyer can be affected by the annulment of the sale due to the existence of debts from previous owners.
In this specific case, the buyer claims to have verified that there was no debt in the seller’s name before the transaction took place in 2011. However, the immediate previous owner of the property had tax debts in its name.
The STJ understood, however, that the fraud against execution is characterized regardless of the good faith of subsequent buyers.
The Court stated that for a fraud to be recognized, it must be demonstrated that the debtor did not have other assets sufficient to pay off the debt at the time of the sale.
SUPREME COURT SUSPENDS JUDGEMENT ON ISS TAX IN CONTRACT MANUFACTURING AND LIMIT OF LATE PAYMENT FINES
The Brazilian Supreme Court is currently deliberating on the Extraordinary Appeal (RE) 882461 (theme 816 of general repercussion) which discusses the taxation of the Service Tax (ISS) on contract manufacturing, carried out with materials provided by the contractor when this operation constitutes an intermediate stage of the productive cycle of goods. The Court is examining whether the operation should be subject to the Value-Added Tax on Goods and Services (ICMS – State VAT) as part of the production chain, or if it represents a service subject to the ISS.
Another point discussed in the case concerns the limit for applying late payment penalties by tax entities. In this case, the State of Minas Gerais applied a penalty of 30% of the tax value for the delay in payment.
On April 24, 2023, the judgment was suspended due to a request for review by Justice Alexandre de Moraes. Until then, there were six votes to rule out the incidence of ISS tax on these operations and to limit the late payment penalty to 20% of the tax debt.
There is also a discussion about the time limitation of this decision (“modulação”), as well as whether the analyzed thesis should also address the incidence of the Tax on Industrialized Products (IPI).
In this regard, the reporting Justice, Dias Toffoli, and three other Justices understood that the IPI cannot be levied upon this kind of transaction, while Luiz Fux and Luís Roberto Barroso argue that the judgment should be limited to analyzing the ICMS versus ISS issue, since the party did not question the cumulativeness with the IPI.
SUPERIOR COURT OF JUSTICE UPHOLDS DECISION THAT DISALLOWED ICMS (STATE VAT) CREDITS FOR EQUIPMENT GIVEN IN FREE LEASE BY FUEL DISTRIBUTOR
In this specific case (Special Appeal 1682028), the fuel distributor purchased goods such as filters, tanks, gas pumps, emblems, and luminous signs, which were lent to gas stations. This type of operation is common in this and other sectors, such as food and beverage.
The Minas Gerais State Court of Justice (TJ-MG) considered that the goods in question, although useful and necessary for the activities of the gas stations, are not directly related to the distributor’s activity, so there would be no right to ICMS credit.
This decision was upheld by the Superior Court of Justice (STJ), based on Article 20, paragraph one, of the Complementary Law 87/96, which establishes that “the inputs of goods or services resulting from exempt or non-taxable operations or provisions, or which refer to goods or services outside the scope of the establishment’s activity, do not give the right to credit.”
The STJ judges concluded that revising the TJMG’s understanding would require the analysis of facts and evidence, which is prohibited by STJ Precedent 7.
SUPERIOR COURT OF JUSTICE AUTHORIZES PIS/COFINS CREDITS ON ICMS-ST
The 1st Panel of the Superior Court of Justice (STJ) unanimously decided that the ICMS (State VAT) collected under the substitution tax system (ICMS-ST) generates PIS and Cofins credits for taxpayers (Resp 2019459). The understanding is that the amounts related to ICMS-ST are part of the price of goods and, therefore, generate the right to credit.
The same understanding has been applied by the court in several cases, despite the 2nd Panel of the same court having a different understanding, in the sense that the amounts paid as ICMS-ST do not generate PIS and Cofins credits.
It is expected that the matter will be brought to the 1st Section of the STJ to unifythe interpretation within the Court.
STF MODULATES THE EFFECTS OF ITS DECISION ON ICMS IN THE TRANSFER OF GOODS BETWEEN ESTABLISHMENTS OF THE SAME TAXPAYER – ADC 49
The Brazilian Federal Supreme Court (STF) has concluded the trial of the Motion for Clarification in the Direct Action of Unconstitutionality (ADC) nº 49. On the merits, the Justices had already declared the unconstitutionality of provisions of Complementary Law nº 87/1996 (Kandir Law) that provide for the levy of the ICMS (State VAT) in the interstate transfer of goods between establishments of the same taxpayer, excluding such taxation since there would be no change in the ownership of such goods.
Now, in the Motion for Clarification presented by the State of Rio Grande do Norte, the Court has modulated the decision to determine that its effects will only take place as of 2024, except for administrative and judicial proceedings pending conclusion until the date of publication of the minutes of the decision on the merits, of 04/29/2021.
In addition, the Court established that taxpayers will have the right to maintain and transfer ICMS credits between their branches, if there is no new law to regulate such aspects until next year.
Thus, taxpayers who have not paid ICMS on their transfers between establishments and do not have a pending lawsuit filed before April 2021 may be charged for the uncollected tax on such operations.
FEDERAL COURT OF SÃO PAULO ALLOWS INCLUSION OF IPI IN COFINS TAX CREDIT CALCULATION
A preliminary injunction issued by a Federal Judge in São Paulo allowed a taxpayer to include the IPI (Tax on Industrialized Products) in the calculation of credits for contributions to PIS and Cofins.
The decision analyzed the Normative Instruction (IN) No. 2,121, issued by the Federal Revenue Service (IRS) on December 2022, which adopted the position that the IPI levied on the sale of goods by the supplier does not generate the right to the acquirer to register PIS and Cofins tax credits, even if the IPI is not recoverable.
Such Instruction represents a change in the understanding of the IRS, which expressly recognized the right to use IPI credits in calculating PIS and COFINS in the past; and causes a reduction in the tax credit and, consequently, an increase of the tax due, without competent law in this sense.
In the decision, the judge pointed out this scenario; and consider that the IRS understanding violates the definition of “cost of acquisition” provided for in the Income Tax Regulation.
FEDERAL JUSTICE OF THE 2ND REGION ALLOWS THE INCLUSION OF ICMS IN THE CALCULATION OF PIS AND COFINS TAX CREDITS
A preliminary injunction issued by a Second Level Judge of the Federal Regional Court of the 2nd Region (TRF-2) allowed a taxpayer to maintain the ICMS (State VAT) in the calculation of PIS and Cofins tax credits, in disregard of Provisional Measure (MP) No. 1,159, of 2023.
The MP was edited by the Federal Government to determine the exclusion of the State VAT from the calculation of the PIS/COFINS credits to reduce the impact of the so-called “thesis of the century” on the federal budget. Based on that thesis, the STF (Supreme Court) decided that ICMS is not included in the PIS/COFINS debts calculation basis.
The magistrate pointed out that the MP is intended to compensate for the loss of revenue resulting from the decision of the Supreme Court and that, under the terms in which it was edited, would rule out the effect of such decision. In addition, the judge emphasized that ICMS is included in the amount paid on purchases of goods and, therefore, the burden of this cost is borne by the taxpayer himself, so that the tax must also be considered for the calculation of PIS/COFINS tax credits.