STF SUSTAINS ITS UNDERSTANDING AND THAT ICMS CANNOT BE CHARGED ON THE SALES OF SOFTWARE
Following the judgment of the Direct Action of Unconstitutionality (ADI) 1.945 and 5.659, the STF reaffirmed its understanding and declared the unconstitutionality of article 3, II of Law 8.198/1992 and of Decrees 61.522/2015 and 61.791/2016 of the State of São Paulo, which provided for the levy of ICMS on the licensing or assignment of software.
In the trial of ADI 5.576, filed by the National Confederation of Services (CNS), the reporting Justice Luís Roberto Barroso proposed the following thesis: “It is unconstitutional the levy of ICMS on the license or assignment of the right to use computer programs.”
The Justice also proposed the modulation of the effects of the decision as of 03/03/2021, date of publication of the minutes of the trial of ADIs 1.945 and 5.659, in which the thesis was initially defined, except for (i) the lawsuits already filed and still ongoing on 03/02/2021; (ii) the cases of double taxation verified until 03/02/2021, in which the ICMS will be refunded, regardless of the filing of lawsuits; (iii) the cases related to taxable events occurred until 03/02/2021 in which neither ISS nor ICMS were paid, in which the payment of the municipal ISS will be due, respecting the statute of limitations.
“BUSINESS ENVIRONMENT LAW” BRINGS ALTERATIONS IN THE CIVIL PROCEDURE CODE
Federal Law 14.195/21 (known as the Business Environment Law) was recently published. Among other matters, there is a chapter which intends to reduce bureaucracy in the procedural laws, especially with regards to the electronic summons and subpoena rules.
The legislation amended several provisions of the Civil Procedure Rules, such as section 246, which now provides that the summoning “will preferably be made through electronic means, within 2 (two) business days, counted from the decision that determined it, and shall be sent to the electronic addresses indicated by the party in the database of the Judiciary, according to regulation of the National Council of Justice”.
If the electronic summons is not confirmed by the party within 3 business days, the summons will be made by mail; court officer; registrar or public announcement. Furthermore, the new rules provide for the need to present fair cause for the absence of the referred confirmation in the first opportunity, under penalty of fines of up to 5% of the value of the case.
The text provides that it is now the duty of the parties, their attorneys and third parties interested in the lawsuits to inform and keep their registration updated before the agencies of the Judiciary System and the Tax Administration, in order to receive summons and subpoenas.
It is still uncertain how the Judiciary will implement the new system. In principle, the National Council of Justice should develop and issue a national tool to unify summons and subpoenas, but this platform is not yet available.
It is necessary to monitor these changes and always be attentive to any e-mails and electronic communications about lawsuits sent to the company.
REFLEXES OF THE EXCLUSION OF ICMS FROM THE BASIS OF PIS AND COFINS – FEDERAL REVENUE ISSUES OPINION TO LIMIT CREDITS ON ACQUISITIONS
As per informed in our Alert issued earlier this month, the Brazilian Federal Revenue has issued Opinion No. 10, in which it presents its understanding of the ruling of Extraordinary Appeal no. 574,706, issued by the Federal Supreme Court (STF). In that leading case the Court defined that the ICMS (State VAT) to be excluded from the basis of PIS and COFINS is the one stated in the invoices, that is, the ICMS levied on the sales, without considering input credits.
The document, which is yet to be confirmed or altered by the National Treasury, was attached to a Writ of Mandamus filed with the Federal Regional Court of the 3rd Region. Despite bringing the assurance that many taxpayers had been waiting for, that the Brazilian Federal Revenue agrees with the exclusion of the ICMS stated in the invoices, the Opinion raises a new issue, aiming at reducing the impact of the STF decision.
The Opinion expresses the Brazilian Federal Revenue understanding that the exclusion of the ICMS from the basis of the PIS/COFINS on sales necessarily results in the need to exclude the ICMS in the assessment of the credits for inputs.
The reasoning of the Brazilian 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, which are based on such price; and that (ii) it would not be reasonable to authorize the inclusion of the ICMS in the credits, since it would cause a distortion in the PIS/COFINS assessment system.
However, the STF did not state that the ICMS is not comprised in the price of the goods. What it ruled is that the ICMS does not represent revenue for the seller of the goods. Even though 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, it is not revenue to the seller because the seller has no entitlement to it, as it has to be passed on to the relevant State Government.
If there are distortions in the PIS/COFINS calculation system, they should be adjusted through the enaction of a new Law and not through an Opinion of the Revenue. Also, it is important to notice that the legislation already provides for situations in which the credit of PIS/COFINS is authorized even when the inputs have not been fully subject to PIS/COFINS (for example, when the goods are sold by a seller subject to the cumulative regime).
Our expectation is that there will be a new round of legal discussions to define the scope of the Supreme Court's decision and the interpretation that should be given to the credit provision in view of such decision.
It is possible to question this Revenue Opinion preventively, under the argument that the wording of the current legislation does not provide for exclusion of the ICMS in the calculation of PIS/COFINS credits. It is also possible to argue that, if any changes to the credit formula are required, 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 of seeking legal protection against possible tax assessments or disallowance of credits.
SUPREME COURT POSTPONES THE TRIAL OF EXCLUSION OF ISS FROM THE PIS/COFINS BASIS
Justice Luiz Fux removed the Extraordinary Appeal 592.616 from the Court's Virtual Plenary. In this case, the Justices discuss the inclusion of ISS (tax on service) in the PIS and Cofins calculation basis. With the decision, the case will be judged in a presential session or by videoconference. There is still no defined date for the new trial.
The scoreboard was 4-4 when Justice Fux interrupted the judgement. With the decision, all votes rendered in the virtual trial are disregarded, and the judgment will be resumed considering only the vote of the reporting Justice, former Justice Celso de Mello.
In his vote, the former Justice had established the following thesis: “The amount corresponding to the ISS does not integrate the calculation basis of social contributions related to PIS and COFINS, because the ISS qualifies as a simple financial entry that merely transits, without any definitive character, through the taxpayer's patrimony and accounting”.
Justice Toffoli, however, disagreed with this understanding, adopting the same understanding he adopted in the exclusion of the State VAT (ICMS) of the PIS and Cofins calculation basis case, in which he was minority, deciding to include the ISS in the basis.
The expectation is that the conclusion of the judgment will only take place after the nomination of the new Justice, which will fill the vacancy left by the retirement of Justice Marco Aurélio Mello.
STF POSTPONES TRIAL OF THE INCOME TAXATION (IRPJ/CSLL) ON THE SELIC RATE IN THE REFUND OF TAXES
The Federal Supreme Court docket the Extraordinary Appeal no. 1.063,187 for trial on September 9. The case discusses the constitutionality of the taxation of the Selic rate through Corporate Income Tax (IRPJ) and the Social Contribution on Net Income (CSLL) in cases of refund of taxes by taxpayers.
The judgment was originally scheduled for August 5, but was repeatedly postponed by the Supreme Court. None of the Justices has presented their votes yet.
In the lawsuit, the National Treasury argues that the interest arising from recovery of unduly paid taxes would represent a new income to the taxpayer. Reversely, taxpayers claim that the Selic rate is a simple restatement of amounts unduly paid, not representing an increase in their patrimony, and therefore the amount should not be subject to taxation.
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