Government steps up pressure on companies that used tax benefits
Brazil’s Federal Revenue increased the pressure on companies that receive incentives on the sales tax ICMS and deducted these amounts of Business Income Tax (IRPJ) and Social Contribution over Net Profit (CSLL) in recent years. A new batch of notifications has been sent out, and this time, according to lawyers, their tone is harsher. Approximately 500 major companies are in the crosshairs.These notifications are internally regarded as a final warning for the taxpayers to rectify their situation voluntarily.For those still deemed non-compliant by the authorities, the next steps will involve inspections and, subsequently, penalties with a 75% fine on the amounts due.In 2021 alone, R$120 billion in exclusions were recorded in the calculation of federal taxes, according to the Secretariat of Federal Revenue.Recovering these amounts is a top priority for the inspection team. The economic team considers addressing subsidy issues as crucial to increasing revenue and achieving the target of eliminating the central government’s primary deficit next year.The dispute between the tax authorities and companies that receive ICMS benefits has been going on for a long time but intensified significantly in the first half of this year following the Superior Court of Justice (STJ) ruling on the matter, which was binding for the entire Judiciary.Finance Minister Fernando Haddad stated that the ministry’s projection for this ruling was to collect around R$90 billion. Brazil’s Secretariat of Federal Revenue indicated an impact of R$47 billion in the Budgetary Guidelines Act (LDO).The Secretariat of Federal Revenue had sent out the first batch of notifications, involving 5,000 taxpayers, in May, a few days after the ruling but before the decision was officially published. The approach was more comprehensive, and the notifications were akin to an "invitation" to self-regularization. The assessment, however, is that it had no effect.This second round of notifications is focused on the significance of the deductions of CSLL from business tax reporting. Taxpayers from various sectors have benefited from substantial amounts. It’s much more specific than the first round."We are convinced that, in these cases, there was an undue deduction of amounts, either in part or in full," said one source.In a statement to the press, the Secretariat of Federal Revenue reported that 60% of the approximately 500 companies that received the notifications in the second wave have...
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