BRAZILIAN FEDERAL REVENUE PROHIBITS THE USE OF TAX CREDITS TO OFFSET INCOME TAX

Among the changes introduced by Law 13,670 / 2018, we highlight the restriction imposed to legal entities to use credits arising from undue payments made from May 30th to offset debts of corporate income tax – IRPJ and corporate social security tax – CSLL due monthly by these companies.

In a simple way, the Federal Government prohibited the monthly offset of IRPJ and CSLL, which, from a practical point of view, implies a direct impact on the cash flow of companies, since before the legal entities were entitle to use their undue payments to offset these obligations and now they must, obligatorily, settle those obligations of IRPJ and CSLL through payment in cash.

This is the second time that the Federal Government tries to restrict taxpayers’ rights. The first time occurred through the edition of Provisional Measure 449, of 2008, which had the same wording as Law 13,670/18. However, at the time of its conversion into Law 1141/09, after the debate in the National Congress, this restriction on taxpayers’ rights was excluded by the legislators.

There are some arguments to question this restriction:

(a) non-retroactivity of the law and violation of legal certainty since the restriction would be reaching the credits (undue payments) generated prior to Law 13,670/18 creating a “new situation” during the current tax year; e

(b) restriction only would be applicable to companies that opt to pay the estimates calculation the basis over their gross revenue (and not applicable to those companies that opt to pay the estimate via the suspension or reduction balance sheet).

Unfortunately, the perspective of obtaing a favorable decision by the Judiciary is not very promissing, mainly because, unlike the previous situation, this time the Federal Government was able to impose this restriction by means of a law duly approved by the National Congress.

We should also remember that the offset in tax matters depends on express prevision in law, fact that was respected through law 13.670/18. There is no vested right of the legal entities of using their credits arising from unproper payments to offset the estimatives of CSLL and IRPJ. There is only a merly expectation of rights to use this credts but not a vested right.

In relation to the discussion over the application of the restriction only to estimates of IRPJ and CSLL calculated over gross revenue, the expectation is also not promissor, since the legislation prohibited the compensation of the estimatives “in a general way”. The difference between pay the estimatives over the “gross revenue” or throught “suspension or reduction balance sheet” according to article 35 – Law 8.981/95) changes only the calculation basis applicable but still keep the payment over “estimatives”.

Even with the existance of a few favorable decisions granted by the TRF4, most of the decisions proununced by the others Judicial Courts of Brazil, and specially by the Federal Regional Court of the 3rd Region – which takes care of cases of São Paulo, were in majority against the taxpayers, deciding that there is no illegality in the restriction.

In any case, even in this scenario, we consider pertinent that taxpayers seek, within the options allowed by the tax legislation, even presenting judicial claims, mechanisms to recognize the right to the full use of their tax credits.