It is undeniable that the recovery of tax credits is an important tool for Brazilian companies of all sizes. However, Normative Instruction RFB No. 2,055/2021, from the Federal Revenue of Brazil, establishes the understanding for the federal agency that the offset of credits should be completed within five years from the final judgment of the legal action that recognized the taxpayer's right.
Such understanding, in addition to contradicting the provisions of Article 168 of the National Tax Code (CTN), significantly impacts taxpayers with substantial tax credits. Depending on the company's operational structure, it is not possible to utilize the entirety of these credits in a short period of time.
Decisions by the Federal Regional Courts (TRFs), however, have recognized that this period should not be applied to the use of credits, but as a limit for initiating the compensation procedure.
A very significant decision was made by the 13th Panel of the TRF of the 1st Region. The Appellate Judge-Reporter of the case, Jamil Rosa de Jesus Oliveira, delivered a vote stating that "(…) the five-year period is only for the beginning of the compensation procedure and, considering that the compensation has already begun, it is possible to use the total amount of the credits recognized judicially, until their exhaustion”.
Another decision, this time from the 12th Federal Civil Court of Belo Horizonte/MG, in a writ of mandamus filed by Marcos Martins Advogados for a client in the metallurgical sector, dismissed the five-year period imposed by the RFB, recognizing that there is no time limit for the company to carry out tax offsetting of its credits. The decision ensures greater stability for the company's cash flow, which will not be hindered by a "surprise" in offsetting its credits.
In his ruling, Federal Judge Daniel Carneiro Machado stated"it does not seem reasonable to impose on companies the requirement to consume/offset their tax credits within a certain period, as the existence of upcoming debts to be offset depends on their size and activity." Such requirement would constitute manifest arbitrariness without any legal basis, clearly restricting the compensation of the credit paid improperly in violation of the judicial enforceable title.”
The understanding that is being 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 to advise 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 a more strategic and better-suited approach to their circumstances.
