Brazil: Superior Court Of Justice To Analyze The Inclusion Of State VAT In The Basis Of Corporate Income Taxes In The Presumed Profit Regime

The Superior Court of Justice (STJ) started the judgment of Special Appeals 1.767.631 and 1.772.470, representative of theme no. 1008, with binding effects. the Court will analyze if the State VAT (ICMS) should be included in the calculation basis of the Income Tax (IRPJ) and the Social Contribution on Net Profit (CSLL) when these taxes are calculated under  the presumed profit regime.

The presumed profit regime is a method of assessing the IRPJ and the CSLL in which the collection is made based on the company's gross revenue, applying a pre-established presumed profit rate according to the economic activity of the company.

The discussion, therefore, is whether the amounts paid by taxpayers as ICMS can be considered gross revenue of companies for the purpose of calculating the presumed profit and payment of the IPRJ and CSLL.

So far, only the Reporting Minister Regina Helena Costa has voted. She highlighted that the amounts belonging to third parties – such as the ICMS, which is passed on from taxpayers to the States – should not be considered company's revenue and, therefore, would not be considered gross revenue for the purposes of levying the IRPJ. and the CSLL.

The Minister cited the Supreme Court judgment on Theme 69 of general repercussion, which established that the ICMS is not taxpayer's income and, therefore, should not be included in the calculation base of the PIS/COFINS, which are social contributions levied on the gross revenue.

After the vote, Minister Gurgel de Faria requested an individual analysis of the case, and the judgment was interrupted, with no scheduled date to resume.

The reporting minister also presented a proposal for limitation of the effects of the trial (modulation of effects), so it would only produce effects after the publication of the final decision of this trial. Such a proposal must be confirmed by the rest of the Ministers.

In light of this, it is important that taxpayers subject to the presumed profit regime and to the ICMS evaluate the convenience for filing a lawsuit to discuss the matter, before the modulation is defined.

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