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Date: March 11, 2019
Posted by: CPDMA team

Spending on compliance with environmental obligations is inputs, says Carf

Spending on compliance with environmental obligations imposed by the government must be considered inputs for PIS and Cofins purposes. The understanding was unanimously agreed by the 1st Ordinary Panel of the 3rd Chamber of the 3rd Section of the Tax Appeals Administrative Council (CARF).

In this case, a company specialized in mining coal on an industrial scale would have been contracted by the government for earthmoving and solid waste services. Therefore, it incurred expenses with compliance with environmental obligations. The inspection allegedly alleged irregularities in the Declaration of Compensation for the Contribution Credit to the Social Integration Program (PIS), resulting from non-taxed domestic market operations in May 2005, after deduction of the contribution amount.

The rapporteur, counselor Liziane Angelotti Meira, understood that it should be considered an input for the purpose of crediting PIS and Cofins due to the activity developed by the taxpayer.

"Input is all that directly or indirectly related to the taxpayer's production and that affects the revenues taxed by said contributions, expenses for the fulfillment of environmental obligations, imposed by the Government, as a condition for the operation of the company, provided that it generates expenses and the depreciation of fixed assets", he says.

For the rapporteur, payments related to the acquisition of earthworks services and final disposal of solid waste, air monitoring and other services necessary for the recovery of the environment entitle to Cofins credits.

"These services are applied or consumed directly in the production of goods intended for sale, in accordance with the provisions of the governing legislation. Compliance with the environmental obligations imposed by the Government, as a condition for the company's operation, generates expenses, these must be considered input. Depreciation of fixed assets should also be considered input", he explains.

The rapporteur recognizes that all expenses incurred as a result of the provision of services related to the environment occurred due to the impositions arising from the Judicial Conduct Agreement and the Conduct Adjustment Terms entered into with the Government.

According to the counselor, Carf has already analyzed a similar process in 2011. "Expenses with environmental protection are generated as a result of an imposition by the Government and in this case, different conduct is unenforceable on the part of the taxpayer. In addition, it is true that without complying with strict environmental control, the company would certainly not be authorized to extract coal, that is, it would be unable to carry out its production process", he explains.

Other expenses claimed by the company, however, do not constitute an input in the understanding of Carf, such as labor costs, even when imposed by Collective Bargaining Agreement (ACT), such as employee transportation and pneumoconiosis control and prevention. According to the rapporteur, they are not related to the production process of a coal mine.

Recognized Understanding

In the assessment of tax expert Breno Dias de Paula, Carf recognized, once again, the authority of the judicial decision of the Special Court of the Superior Court of Justice by not restricting the concept of inputs for taking Pis and Cofins credits. "And it defined that the environmental obligations towards the public power are essential and relevant for the business activities", he points out.

For the specialist in Tax Law Allan Fallet, as of August 2010, the judgments of the Superior Chamber of Carf inaugurated the position of administrative jurisprudence in the sense that a specific concept of inputs for the crediting of PIS and Cofins should be adopted. .

"This changed the tax legal scenario, which influenced the Judiciary, which has been manifesting itself in a similar way. With the judgment of REsp No. 1.221.170/PR by the STJ, the understanding that the concept of input should be measured by light of the criteria of essentiality or relevance as well as the use of the subtraction test, which is an opportunity to examine whether there is direct and indirect use in the production process, in view of the assessment of essentiality and relevance", he explains.

For Fallet, despite the collegiate having recognized the credits, some expenses, although related to the production process, were disregarded through a factual and evidentiary verification by the administrative authorities, such as expenses with explosives and operationalization courses of these and several important services for the development of the activity.

"In other words, it is precisely the difficulty of identifying and determining what would be an essential and essential good or service for each specific case, which should be credited with the jurisprudential and doctrinal concern on the subject, which gives it both relevance and topicality. ", he defends.

Source: Gabriela Coelho via Conjur.

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