The Brazilian Federal Revenue has issued Opinion No. 10 addressing the ruling issued by the Federal Supreme Court (STF) in Extraordinary Appeal no. 574,706, in which the Court confirmed that the ICMS indicated in the invoices (levied on the sales) should be excluded from the basis of PIS and COFINS.
The Opinion, which is yet to be confirmed or altered by the National Treasury Attorney, was presented in a Writ of Mandamus filed by a taxpayer before the Federal Regional Court of the 3rd Region.
Despite bringing assurance that the Federal Revenue will observe the ruling rendered by the Supreme Court, it raises a new issue, aiming at reducing the impact of STF´s ruling, expressing the understandings that the exclusion of the ICMS from the basis of PIS/COFINS on sales would necessarily result in the exclusion of the ICMS from the calculation of the credits on the acquisitions of inputs.
The reasoning of the Federal Revenue was that (i) if the ICMS is not comprised in the price of the goods, it should not be base for the credits of PIS/COFINS; and that (ii) it would not be reasonable to authorize the inclusion of the ICMS in the calculation of the credits, since it would cause a distortion in the PIS/COFINS assessment system.
However, the Opinion fails to observe what was actually decided by the STF. The ruling never stated that the ICMS would not comprise the price of the goods, but rather that the ICMS does not represent revenue for the seller of the goods. I.e., the ICMS is part of the price of the goods (by legal provision) and therefore it should be considered part of the value of the acquisition of the inputs (basis for the credits), although it is not revenue for the seller.
Any alleged distortion in the PIS/COFINS calculation system could be adjusted through adjustments of prices between companies and should be corrected by passing of a new Law and not through an Opinion of the Revenue. Also, it is relevant to notice that the legislation already provides for situations in which the credit of PIS/COFINS does not necessarily observe the amount collected by the seller (for example, when the goods are sold by a seller subject to the cumulative regime).
If such an Opinion is confirmed by the National Treasury Attorney, our expectation is that there will be a new round of legal discussions.
In our view, it is possible to question this Opinion preventively, since it distorts STF´s ruling and the current legislation does not provide for the exclusion of the ICMS from the calculation of PIS/COFINS credits. It is also possible to argue that, if any changes to the credit formula are applicable, they should only produce effects for the future.
It is highly recommended that taxpayers evaluate their specific situation and the potential impact of such Opinion on their operations, as well as the convenience and timing of seeking legal protection against possible tax assessments or disallowance of credits.
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