1 – Superior Court of Justice – STJ overturns late payment fine on federal taxation of imports supported by Drawback-Suspension

The STJ recently analyzed an appeal filed by a corporate taxpayer that claimed there was a discrepancy in the case law development regarding application of a late payment fine in cases of non-compliance with re-exportation obligation in operations supported by the Drawback customs system (Suspension modus operandi).

The Court ruled that the Drawback-Suspension is a system whereby the customs duties and other federal taxes on imports (Customs Duties - II, Social Contribution Program – PIS on importation, Social Security Finance – COFINS contribution on importation, and Excise Tax – IPI on importation) are suspended under the resolutive condition of the effective export of the finished products; in case of failure to re-export, interest and monetary restatement are due from the moment of registration of the Import Declaration.

On the other hand, the penalty for late payment would only be due after the 30-day period established in the Customs Regulations for timely extinction of the Drawback.

Thus, according to the STJ's interpretation, there is no delay in the obligation to re-export until the 30th day of the deadline set therefor, which is why the late payment fine should not be applied in these cases.

2 - ITCMD on inheritances and donations from abroad

In the first half of 2021, the highest court in our land, the Brazilian Supreme Court (STF), ruled that state laws establishing the Gift and Inheritance Tax (ITCMD) on inheritances and donations from abroad were unconstitutional, due the lack of complementary federal law on the subject. The decision's effects are prospective, which means that they are valid from the judgment date onwards, except for the ongoing lawsuit.

Whereas the binding effect of the decision is restricted to the ongoing lawsuits, and not to the public administration, in May of 2021 the Attorney General's Office of the Brazilian National Treasury (PGR) filed 24 (twenty-four) Direct Unconstitutionality Lawsuits (ADI 6.817 to 6.840) against state laws that regulate the issue.

STF endorses the suspension of rules that regulate the ITCMD abroad.

3 - IOF-Loan Daily Rates Have Been Temporarily Increased

The Brazilian government temporarily increased the daily rate of the Financial Operations Tax (IOF) on loans involving transactions carried out in the 4th Quarter of this year (i.e. between September 30 and December 31, 2021).  Such rate was increased from 0.0041% to 0.00559% for companies and from 0.0082% to 0.01118% for individuals.

It is important to mention that taxpayers can challenge this tax increase in court, because the IOF is a tax for the purpose of economic induction, rather than collection, as established by the federal government.

Finally, the IOF-Exchange (financial operations tax on foreign exchange) rates were not increased, but only the IOF-Credit rates.

4 - Tax Recovery Program – Extension of deadline for renegotiation of debts

The Brazilian National Treasury Attorney's Office (PGFN) extended, through Ordinance PGFN/ME n. 11,496/2021, the deadline for joining the Tax Recovery Program established in September 2020, to encourage companies to straighten out their tax debts regularization and help economic recovery from impacts caused by the Covid-19 pandemic.

Taxpayers registered with the Federal Government who have debts in terms of taxes and contributions, as well as with the Guarantee Fund for Length of Service (FGTS – a kind of severance pay accrual) up until November 30th, 2021 will be able to join the program by the last working day of December (the 29th this year).  Among the kinds of modus operandis for such transactions, the highlights are the “Exceptional Transactions” and “Extraordinary Transactions”.

Exceptional transactions are available to taxpayers who can prove the economic and financial damage caused by the pandemic on their operations; the program calls for a down payment of four per cent (4%) of the amount of their debts, payable in monthly installment payments over a period of 12 (twelve) months.  The remaining amount can be split up to into further installment payments over a period of 72 (seventy-two) months.  Furthermore, in this transaction model, the taxpayer can obtain up to 100% discount on interest and penalties, with a limit of up to 50% of the total debt amount.

Extraordinary transactions are available to all taxpayers and requires a down payment of 1% (one per cent) of the debt amount in installments within 3 (three) months.  The remaining amount can be paid within 81 (eighty-one) months.

As for Social Security (INSS) debts, for both modalities, they have a payment limit of up to 60 (sixty) installments.

This is an opportunity for companies that have federal tax debts due, and the opportunities must be evaluated according to the specific situation of each taxpayer.

5- Federal PIS and Cofins contributions on state value-added tax on circulation of goods and services (ICMS) - Alleged effects of the Supreme Court decision on credit bases

In July/21, the Brazilian Federal Revenue Bureau (RFB) issued Cosit Opinion n. 10/2021, which concluded by excluding the ICMS value highlighted in a company's invoice from the calculation basis of the contribution credits for the PIS/Pasep and for the Cofins, as it believes that the aforementioned amount is not part of the price of the goods/services.  It was an attempt to apply by analogy in light of the decision of the so-called "thesis of the century" of the Federal Supreme Court (STF), which established the interpretation that the state ICMS does not encompass the taxpayer's gross revenue for purposes of calculation of the federal PIS and Cofins.

However, in September/2021, the National Treasury Attorney's Office (PGFN) issued SEI Opinion n. 14483/2021/ME, whereby the understanding previously expressed by the RFB was overcome, ensuring the inclusion of the ICMS portion in the breakdown of the PIS and Cofins, in addition to stating that the prohibition of the right to the respective credits should be changed through the legislature.  As a result, greater legal certainty was provided to taxpayers.

The PGFN's statement shed light on the issue and allayed the fear of the business community after the RFB's statement.

6 - Interest of Tax Credits Must Not Be Subject to the Corporate Income Taxes (IRPJ and CSLL)

In September/2021, Brazil's Supreme Court (STF) declared that it was unconstitutional for Corporate Income Taxes (IRPJ and CSLL) to be levied on interest based on the SELIC rate added to unduly paid federal taxes.

This topic is extremely important for taxpayers, because many companies are recovering large amounts of tax credits, monetarily updated, after the conclusion of the thesis of the century (exclusion of ICMS from the PIS and COFINS base).

7 - There Are Still Uncertainties on the Approval of Income Tax Reform

The bill for Income Tax Reform was approved by the Chamber of Deputies and now will be discussed in the Senate, where it will face more resistance.

According to some Senate representatives, Consumption Tax Reform may be granted priority over Income Tax Reform.  In view of this, there are still doubts regarding the approval of the tax reform in 2021.

8- Changes under discussion in Congress

8.1- Possible extension of the Social Contribution on Gross Revenue (CPRB)

The Finance and Taxation Committee of the Chamber of Deputies approved Bill n. 2,541/21, which extends from December 2021 to December 2026 the term of the social security contribution on gross revenue (CPRB) for 17 sectors of the economy.

The sectors are: footwear, call centers, communications, confection/clothing, civil construction, construction companies and infrastructure works, leather goods, vehicle and bodywork manufacturing, machinery and equipment, animal protein, textile, IT (information technology), ICT (communication technology), integrated circuit design, subway-railway passenger transport, collective road transport and road freight transport.

The bill is currently in the Constitution and Justice and Citizenship Committee of the Chamber of Deputies.

8.2- Bills for new debt installment payment programs

Given the current economic scenario, there is a great deal of news and discussion circulating in Congress about the possibility of instituting federal debt installment payment programs.

Among the main projects, there is the possibility of reopening the Special Program for Tax Regularization (PERT), referred to in Law n. 13,496/17, which was sent to the Chamber of Deputies after approval by the Senate.

Aiming at relief for companies affected by the Covid-19 pandemic, the objective would be to institute a new debt installment payment program, providing the possibility of paying tax debts in up to 144 installments, allowing a discount of up to 90% on interest and fines, in addition to the possibility of offsetting tax losses.  The bill also provides for changes in the tax transaction institute, to ensure more installments and discounts to taxpayers.

8.3- Chamber commission created to discuss technology taxation

The Chamber of Deputies' Committee on Science and Technology, Communication & Information Technology is analyzing Bill n. 2,358/20, which institutes the Contribution for Intervention in the Economic Domain (Cide-Digital), levied on gross revenue from digital services provided by big tech companies.

On September 20, 2021, a public hearing was held to debate the institution of Cide-Digital.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.