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Date: September 14, 2020
Posted by: CPDMA Team

The Brazilian taxpayer in the turbulent waters of the STF

The Italian poet Francesco Petrarca in the 14th century, paraphrasing Plutarch, said that “to sail is necessary, to live is not necessary”. Thought represents the conflicting coexistence between the precision of navigating and the imprecision of living. This conflict remains current, more alive than ever. With the technological advance, we have more and more precision for many things in life, and contradictorily, we have more and more uncertainties and inaccuracies in living.

In Brazil, for taxpayers and entrepreneurs, it could not be different.

In recent months, despite the rules of social distancing and, consequently, the impossibility of holding in-person judgment sessions, the Federal Supreme Court ruled and judged several tax issues of great relevance to Brazilian companies.

The STF ruled that the collection of the contribution of 10% to the FGTS on dismissals without just cause was constitutional, a contribution that was charged between 2001 and 2019 and, later, extinguished by the National Congress as of January 2020. The National Treasury Attorney's Office estimated, if it were the collection was deemed unconstitutional, that there would be a need to refund to taxpayers an amount greater than R$ 40 Billion.

Another old dispute recently resolved by the STF concerns the incidence of the Tax on Industrialized Products (IPI) levied on those companies that import goods. The main argument in favor of taxpayers was that there would be no reason to charge the IPI in duplicate: once in the clearance of goods, another in the resale of the product in the domestic market. The Federal Supreme Court, however, considered the constitutionality of charging the IPI on imported goods, especially with a view to protecting the national industry.

A little over a week ago, the STF also ruled on the issue involving the levy of the Employer's Social Security Contribution on the amounts paid to employees under the title of “Constitutional Vacation Third”. The taxpayers argued that the amounts paid in relation to this amount consisted of indemnity items, and not amounts that made up the workers' remuneration. As the Social Security Contribution must be levied only on the remuneration amounts, the taxpayers understood that the portion of the “Constitutional Vacation Term” should be separated from the base on which the tax is levied. In a virtual plenary judgment, however, the STF understood in a different sense, concluding that the "Constitutional Vacation Third" is paid regularly, periodically, and as a form of complement to the worker's remuneration, and should, therefore, be included in the salary base. calculation of the Employer's Social Security Contribution.

As can be seen, the judgments handed down by the STF and briefly reported above had an unfavorable outcome for taxpayers. Although all three discussions were very well founded and with solid arguments in favor of the companies, the STF decided to judge the cases in favor of the tax authorities. Precisely when society in general has great difficulties in following up and participating in the Court's judgments, several decisions were handed down on tax matters, repeatedly unfavorable to taxpayers.

It is necessary to carefully and carefully monitor recent developments in tax matters in the Federal Supreme Court, especially due to the already known economic impacts that this type of judgment has on the public budget. Tax matters, like all others, must be judged technically and, whenever possible, away from class interests or other powers of the republic.

In the coming months, other relevant topics for corporate taxation should be judged, such as: the discussion on the constitutionality of contributions to the S System (SESI, SEBRAE, SENAI, SESC), the possibility of taking PIS/COFINS credits in the acquisition of single-phase products, exclusion of ISS from the PIS/COFINS calculation basis, contribution of the Legal Entity Rural Producer to FUNRURAL, among others. 

In conclusion, it is recommended that companies continue to discuss in court all taxes that may be somehow tainted by illegalities or unconstitutionality, provided that the grounds and arguments that lead to such vices are duly presented. 

As much as the recent wave of judgments carried out by the STF has been mostly unfavorable to taxpayers, it is of paramount importance that companies file lawsuits mainly discussing those issues that have not yet been the subject of a final decision in the STF, whether to enforce their rights before the Tax Authorities, or to guarantee the longest possible period of recovery of values when the Court judges the case in a favorable way to the taxpayers. Sailing is necessary...

In this context, relying on the support of experienced professionals who are used to carrying out tax discussions is essential for the success of your company in the search for greater efficiency in tax assessment, in a prudent and safe way. César Peres Advocacia Empresarial's specialized team in Tax Law is at your disposal to assist in this and other demands of your company.

Source: Wagner Arnold Fensterseifer, attorney at Cesar Peres Dulac Müller, specializes in Tax Law.

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