Text prepared by the team at Zaroni Advogados
Despite the pandemic caused by the Coronavirus and the intense and troubled political scenario currently experienced in the country, several tax issues of extreme relevance for Brazilian taxpayers have been and are being brought to discussion by the Federal Supreme Court this June, with results this year.
The following is a summary of the main cases under analysis by the Supreme Court in the coming months, which, even though they have been on the agenda for several years, can have a financial impact on taxpayers, in the midst of the pandemic, favorably or unfavorably.
Constitutionality of the application of IPI tax on the resale of imported products (RE 946.648):
The case in question addresses the potential double application of IPI on imported products, as it is required both in the importer’s operation of exit for resale in the country, and when the product arrives in Brazil. The Judge-Rapporteur of the case, Justice Marco Aurélio, issued his vote, in a virtual judgment held on June 5th, for the unconstitutionality of tax levy on the exit of the importing establishment for marketing in the domestic market, and confirmed the thesis that “Tax on Industrialized Products – IPI is not levied in the marketing of product deemed to be an imported product, which is not preceded by industrial activity”.
In the opinion of the Rapporteur, the trader and importer should not be considered an IPI taxpayer in internal operations carried out with imported industrialized products, as it is not considered industrial by comparison. Thus, discriminatory treatment should not be given to the act of simple resale of the goods by the importer, overtaxing economic activity.
The case will go to trial again in the next few days, as a result of Justice Dias Tofolli’s request to see the records.
Validity of Supplementary Law 24/75 – Unanimous decision quorum for approval of ICMS tax benefits
under Confaz (ADPF 198).
In a virtual trial, the Federal Supreme Court began to examine the requirement of unanimity for the National Council of Treasury Policy to authorize ICMS tax incentives granted by the States.
On the taxpayers’ side, mandatory unanimity undermines the autonomy of States over tax collection, as determined by the Federal Constitution and, violates the democratic principle. Furthermore, the Federal Constitution does not establish unanimous approval in any of its acts, the highest being the quorum for approval of the Constitutional Amendment – 3/5 of the Houses of Congress.
As Justice Edson Fachin explains in his vote, already rendered, the States have their economic and social motivations to support the granting of tax incentives and attract ventures to their territories, and cannot limit the determination of tax benefits to Confaz.
Justices Edson Fachin, Marco Aurélio and Ricardo Lewandowski vote for the unconstitutionality of LC 24/75, while Justice Carmen Lúcia and Justice Gilmar Mendes vote for constitutionality. The case will return to judgment in August.
Obligation to pay IRRF on dividends remitted by a Brazilian legal entity to a partner residing in Sweden and the application of the exemption provided for in the international treaty signed between the countries (RE 460.320):
This Extraordinary Appeal, the Rapporteur of which is Justice Gilmar Mendes addresses the hierarchy of international treaties on tax matters under subsequent nonconstitutional law, which addresses the same matter.
The discussion is limited to the constitutionality (or not) of the extinct collection of Withholding Income Tax (IRRF) on dividends paid to residents abroad (Volvo shareholders residing in Sweden), under two perspectives: that of isonomy in tax matters; and that of the principle of non-discrimination provided for in the Treaties to avoid Double Taxation (DTTs), of which Brazil is a signatory – as Brazilian residents are exempt from the tax on dividends perceived in the country.
The appeal is still pending judgment by the Federal Supreme Court and is expected to take place this June.
Constitutionality of pre-execution record (ADIs 5,881, 5,886, 5,890 and 5,925).
The Federal Supreme Court started the judgment of constitutionality of Law No. 13,606/2019, which allows the Public Treasury to freeze the assets of taxpayers in debt to the Federal Government, without a judicial decision, the so-called pre-execution record.
Justice Marco Aurélio, in his vote, understood that the provision is unconstitutional, as it promotes “disharmony with constitutional goals in the sense of preventing as much as possible the exercise of self-protection by the State”, in addition to “violating the principle of legal security and effectiveness of jurisdictional provision”.
The judgment is expected to resume in early July.
Applicability of immunity related to social contributions on revenues from export operations intermediated by trading companies (RE 759,244).
In this case, already judged by the Supreme Court, the following thesis was established: “The immunizing rule contained in item I of paragraph 2 of article 149 of the Constitution of the Republic reaches the revenues from indirect export operations characterized by the existence of a negotiating participation by an intermediate exporting company”.
With this decision, favorable to taxpayers, immunity related to social contributions on revenues from export operations also in operations intermediated by trading companies is now granted.
In order to take advantage of the immunity recognized by the STF, companies that carry out such operations must file preventive lawsuits, in order to enjoy the new benefit and avoid possible assessments by the Tax Authorities, until the necessary administrative measures are taken to interrupt the charges made to this end.