Superior Court allows tax authorities to demand immediate return of credits
The Superior Court of Justice of Brazil has, for the first time, delivered a ruling on a matter that significantly affects exporters. It concerns the "fast-track" procedure, a system where Brazil’s Federal Revenue Service approves the early refund of accumulated credits, namely PIS (tax for the program of social integration), Cofins (contribution for the financing of social security), and IPI (tax on industrialized products).The court ruled that if a review by the tax authorities determines that a refunded credit was inappropriately granted, the company that received the refund must repay the amount immediately to the federal government. That means the company is obligated to pay, even if it disputes the findings of the tax authorities. Subsequently, the company can initiate an administrative process to contest the decision that deemed the credit invalid.The process deviates from the standard procedure for tax collections. Typically, when a taxpayer challenges a tax before the Administrative Council for Tax Appeals (known as Carf in Brazil), the requirement to pay the disputed tax is temporarily halted.The court’s initial ruling on this matter came from its 2nd panel in a case concerning Bunge, the global food and agribusiness company. The entire panel unanimously voted in favor of the immediate repayment of the contested amounts (under the case reference REsp n. 2.071.358).Industry experts highlight the significance of this debate for the broader market. Due to Brazil’s non-cumulative tax system, export-oriented companies often accumulate substantial tax credits. These companies purchase raw materials inclusive of taxes, leading to credit generation. However, they often cannot utilize these credits since overseas sales are tax-exempt.The potential for reimbursement arises due to Brazil’s legislative provisions. According to Brazilian law, if a company has accrued credits over three consecutive months, it is eligible to request a refund of these accumulated credits. Traditionally, obtaining this refund has been a lengthy and bureaucratic ordeal.The "fast-track" system was introduced to simplify and expedite this procedure. Under this system, the Federal Revenue Service provisionally refunds the credits to qualifying companies before conducting a comprehensive review."This system offers crucial financial relief. For some businesses, it’s a lifeline, "remarked Marcos Matsunaga, a Ferraz de Camargo e Matsunaga law firm partner.Generally, this...
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