BRAZIL Trends and Developments Contributed by: Raquel Novais, Marco Behrndt, Daniella Zagari and Clara Gomes, Machado Meyer
for Social Security Financing) litigation. The STJ has selected the matter under the repetitive appeals sys - tem, in Theme No 1,412, which will determine wheth - er those amounts should be included in the PIS and COFINS taxable basis under Article 1, Paragraph 3, V, “a”, of Laws No 10,637/2002 and No 10,833/2003. Theme No 1,412 reflects a clear divergence within the STJ. The First Panel has adopted a more flexible approach, treating bonuses and discounts as reduc - tions in acquisition cost, particularly when linked to pricing dynamics. The Second Panel has taken a stricter view, especially where it identifies commer - cial consideration, accounting offsets, or in-kind pay - ments, treating such amounts as taxable revenue. The issue therefore requires a case-by-case analysis of the legal and economic nature of each arrangement. In many cases, bonuses reflect price adjustments or volume rebates that reduce acquisition cost without generating new taxable revenue. In others, the Federal Revenue Service ( Receita Federal do Brasil – RFB) argues that they represent remuneration for services provided by retailers, such as promotional activities or product placement. The controversy reflects a broader shift towards a substance-over-form approach, focused on whether there is an effective accession to wealth or merely a pricing adjustment. The STJ’s decision in Theme No 1,412 is expected to establish clearer criteria for distinguishing non-taxable adjustments from taxable revenue, with significant implications for accounting practices, contract structuring, and tax compliance in the retail and consumer sectors. Government grants Government grants, particularly those granted by Bra - zilian states in connection with the ICMS – Imposto sobre Circulação de Mercadorias e Serviços (value- added tax on goods, transportation, and communi - cation services) tax and financial incentives, remain among the most sensitive issues in Brazilian tax liti - gation. After years of controversy over the exclusion of these benefits from the IRPJ and CSLL taxable bases, Law No 14,789/2023 fundamentally changed the applicable framework. The law revoked Article 30 of Law No 12,973/2014 and, as a general rule, now subjects revenues arising from government grants to
the IRPJ, CSLL, PIS, and COFINS, while introducing an IRPJ tax credit subject to specific requirements. This legislative change has reignited disputes, par - ticularly because it interacts directly with prior STJ precedents. In EREsp – Embargos Em Recurso Espe- cial (Special appeal motions staying the proceedings) No 1,517,492/PR, the Court held that the taxation of presumed ICMS credits by the IRPJ and the CSLL could violate the federative pact. In Theme No 1,182, the STJ established criteria for excluding other ICMS- related tax benefits from the federal taxable base. The new statutory regime therefore raises questions as to its compatibility with established case law and con - stitutional principles governing the allocation of taxing powers. Several cases currently challenge the constitutionality of levying the PIS, COFINS, IRPJ, and CSLL on finan - cial credits granted as government incentives. From the taxpayers’ perspective, there are consistent argu - ments that such amounts do not qualify as taxable revenue or available income, particularly where they derive from state public policies aimed at reducing tax burdens, fostering economic activity, or promot - ing regional development. The dispute also turns on the distinction between accounting recognition and taxable materiality. Even where such benefits are rec - ognised in financial statements as revenue or as a reduction of liabilities, this does not necessarily imply a definitive inflow of wealth or an increase in income capable of inclusion in the PIS, COFINS, or income tax bases. The appropriate tax treatment therefore depends on whether there is an effective accession to wealth, as opposed to a mere accounting adjust - ment linked to public policy mechanisms. Given the tension between Law No 14,789/2023, STJ precedents, and constitutional limits related to the concepts of revenue, income, and the federative pact, government grants are expected to remain a central issue in Brazilian tax litigation in the coming years. This relevance has been reinforced by the STJ’s selection of REsp – Recurso Especial (Special Appeal) No 2,221,127, No 2,171,374, No 2,188,361, and No 2,188,282, reported by Justice Regina Helena Cos - ta, for judgment under the repetitive appeals regime
62 CHAMBERS.COM
Powered by FlippingBook