The Full Court of the Federal Supreme Court will start to hear, next Wednesday, the issue concerning the charge or not of the income tax on profits earned by associate companies or subsidiaries abroad.

This matter involves the debate on several concepts, among them the legal availability and the economic availability of income, brought by article 74 of Provisional Measure (MP) 2158/20011.

The discussion is important, since the constitutionality or not of the mentioned article was object of a number of appeals, which led the STF to recognize the general repercussion of the matter, so the present judgment, for this reason, will put an end to the discussions in the Federal Regional Courts, as well as in administrative courts.

It is worth pointing out that the Supreme Court had already started debating on the matter at the time of the judgment of Direct Action for the Declaration of Unconstitutionality (ADI) 2588, when four justices votes in favor of the action and four against it. The reporting judge of the ADI, Justice Ellen Gracie, issued a partial position, ruling out the taxation only for associated companies abroad, but maintaining it for subsidiaries.

Despite the tied decision in ADI 2588, the discussion in the Full Court may take a different turn in the present Extraordinary Appeal (RE), since two of the Justices that voted against the action have already retired, so there might be a change at the time of the judgment of the extraordinary appeal.


1 "Article 074 – For the purpose of determining the tax basis of the Income Tax and the CSLL, pursuant to article 025 of Law no. 9249, dated December 26, 1995, and article 021 of this Provisional Measure, profits earned by an associated company or subsidiary abroad will be deemed available for the holding company or associated company in Brazil on the date of the balance sheet in which they were ascertained, pursuant to the regulation."

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