It is undeniable that the recovery of tax credits is an important instrument for Brazilian companies of all sizes. However, the RFB Normative Instruction 2,055/2021, of the Federal Revenue of Brazil, generates the understanding for the federal agency that the compensation of credits should be completed within five years of the final transit of the lawsuit that recognized the taxpayer's right.
Such understanding, in addition to contradicting the content of article 168 of the National Tax Code (CTN), significantly impacts taxpayers who have large tax credits. Depending on the operational structure of the company, it is not possible to use all these credits in a short time.
Decisions of the Federal Regional Courts (FRFs), however, have recognized that this deadline should not be applied to the use of credits, but as a limit for the initiation of the compensation procedure.
A very significant decision was that of the 13th Class of the TRF of the 1st Region. The Judge-Rapporteur of the case, Jamil Rosa de Jesus Oliveira, gave a vote arguing that “(..) the five-year period is for the initiation of the compensatory procedure only and, considering that the compensation has already been initiated, it is appropriate to use the total amount of the claims recognised in court until they are exhausted”.
Another decision, now from the 12th Federal Civil Court of Belo Horizonte/MG, in a security warrant filed by Marcos Martins Advogados for a client in the metallurgical sector, removed the five-year period imposed by RFB, recognizing that there is no time limit for the company to perform tax compensation of its credits. The decision guarantees greater stability to the cash flow of the company, which will not be prevented from “” offset its credits.
In his sentence, Federal Judge Daniel Carneiro Machado stated “which does not seem reasonable to impose on companies the requirement to consume/compensate their tax credits in a certain period of time, if the existence of outstanding debts to be compensated depends on their size and activity. Such requirement would constitute manifest arbitrariness without any legal basis, creating clear restriction to the compensation of credit unduly paid in defiance of the judicial executive title.”
The understanding that is consolidated represents a significant victory for taxpayers in the interpretation of tax compensation legislation and demonstrates the essentiality of the support of a legal team for the advice of companies.
With the new interpretation, companies now have the opportunity to better plan how and when to use their tax credits, which can help ease financial pressure, allowing for more strategic action that is more appropriate to their circumstances.
