ICMS exemption is automatically excluded from the IRPJ and CSLL rule

If a company receives tax incentives and benefits from ICMS, and this amount is recorded as a profit reserve, it should automatically be considered an investment support. Thus, it is excluded from the basis of calculation for IRPJ and CSLL.

Thus, the second body of the Supreme Court of Justice adopted a more favorable taxpayer interpretation of this dispute.

For federal revenue, a tax benefit can only be classified as a subsidy if companies demonstrate that incentives have been given to invest in their economic activities.

Without this, the value should consist of the amount of real profit, on which the corporate income tax and social contribution on net income are levied.

For taxpayers, Supplementary Law No. 160/2017 equated all tax or fiscal-financial benefits of ICMS to investment support, in a vague way. Thus, it will no longer be necessary to prove that they are used in investments.

STJ’s final conclusion was presented in an actual ruling on the ban for the purpose of clarification, and was accepted by the assembly on 3 October. The verdict was issued on the sixth of the same month. The vote came unanimously, according to the position of the rapporteur, Minister Mauro Campbell.

Legislation and purpose
The case is about Law 12973/2014whose Article 30 states that subsidies (tax incentives) for investment granted as an incentive to implement or expand economic enterprises will not be counted in determining real profit, provided that it is recorded in the profit reserve.

The idea is that this amount that the state fails to collect for the taxpayer is used to reinvest in the development of the company itself, and for this reason cannot be considered as profit and, therefore, constitutes the basis for the calculation of the IRPJ and CSLL.

In collecting these taxes, Federal Revenue specified that ICMS support could only be removed from the basis of an IRPJ and CSLL account if it was granted by states exclusively to encourage the implementation or expansion of economic enterprises.

What changed the game is to edit a file Complementary Law No. 160/2017which included Paragraph 4 in Article 30 of Law 12973/2014 to equate all tax or financial and tax benefits related to ICMS with investment support.

In the interpretation of federal revenue, despite this parity, it must be added to forecasts capital In other words, it will still be necessary to prove the purpose of the subsidy, in order to exclude it from profit only when it is given as an incentive to enterprises.

In accepting the request for clarification, the second committee of the STJ gave a more favorable explanation for the taxpayer: if it is a tax benefit related to ICMS, then it is also a subsidy for investment. Therefore, it is sufficient for it to be recorded in the profit reserve to be excluded from the basis of the IRPJ and CSLL account.

Minister Mauro Campbell said: “Although it is not possible to demand proof that the incentives were designed as an incentive to implant or expand economic enterprises, the need to be recorded in the earnings reserve and the corresponding restrictions remain.”

Dire consequences for the taxpayer
Acceptance of these ad bans is excellent news for taxpayers. Bruno Teixeirapartner at TozziniFreire Advogados, explains that it no longer matters if the tax advantage is used to implement an economic enterprise or if it is for financing.

Instead, there is one requirement that the taxpayer must fulfill, which is the formation of a financial initiative reserve.

Marcelo Lil, a partner at Schuch Advogados, highlights that this position allows taxpayers to overcome a previously indomitable barrier imposed by the Treasury. Before that, to qualify the tax benefit as a benefit, it will be necessary to prove data on the tax policy of the federal entity.

With the position of the second commission, the possibility opens for the taxpayer who has been overcharged to recover this amount. It will be possible to request reimbursement of unpaid payments (Article 165 of the CTN) or compensation (Article 170 of the CTN), provided that the statute of limitations is observed.

“Otherwise, the legal equivalence stipulated in Article 30, Paragraph 4 of Law 12.973/2014 (covered by Supplementary Law No. 160, of 2017) would be harmless,” said Marcelo Leal.

Bruno Teixeira also stated that the discussion goes a little further. STJ says that it does not even need to create a reserve, because if the union wants to tax a tax incentive given by the state, it is in fact in violation of the federal agreement to the extent that taxing the tax policy granted by another entity, he said. From the union, but that’s not all there is to it.”

“For the second committee, they understand that there is no harm in the federal agreement, only that one requirement must be complied with, and the two requirements that the federal agreement must obey is no longer attracting a lot of attention,” he finished.

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