At the end of May, the Federal Supreme Court (STF) started hearing RE (Extraordinary Appeal) 591,340, which deals with the constitutionality of the limitation of the right to offset tax losses of IRPJ – Corporate Income Tax and the negative tax base of CSLL – Social Contribution on net income. During the session, which will continue on June 27, the report was read and oral arguments were presented. 

The appeal was filed by Pólo Industrial Positivo e Empreendimentos Ltda, answering a decision of the Federal Appellate Court (TRF) of the 3rd Region that considered legal the limitation, of 30% for each base year, of the taxpayer’s right to offset the tax losses of IRPJ and the negative tax base of CSLL.

The company maintains that the limitations imposed by Acts 8,981/95 and 9,065/95, of which constitutionality is discussed in the process, constitute taxation on the equity or capital of companies, and not on profits or income, tampering the concepts set forth by Commercial Law and the Federal Constitution.

The appealing company was the first to sustain the validity of the claim. The entity recalled that in previous cases, the judge-rapporteur of the matter, Justice Marco Aurélio Mello, voted for the unconstitutionality of the general limit of 30%. The company also argued that limiting the deduction of tax losses results in a true compulsory loan, because the taxpayer disburses the value to pay for IRPJ and CSLL in advance and then recovers them by offsetting the negative tax base not used.

The Office of the General Counsel for the Federal Treasury defended the constitutionality of the limitation of tax losses. The counsel pointed out that quantitative limitation is an international practice and that countries like USA and France also adopt the measure. According to him, this is a model that ensures the government has better budget planning and good legislation for public finance.