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 Brazilian Federal Revenue Office, establishes the understanding that the offsetting of credits should be completed within five years from the final decision of the court ruling that recognized the taxpayer’s right.
This understanding not only contradicts the content of Article 168 of the National Tax Code (CTN) but also significantly impacts taxpayers with substantial tax credits. Depending on the company’s operational structure, it may not be feasible to use all these credits in a short period of time.
Decisions by the Federal Regional Courts (TRFs), however, have been recognizing that this deadline should not be applied to the utilization of credits but rather as a limit to initiate the offsetting procedure.
A very significant ruling was made by the 13th Panel of the 1st Region Federal Regional Court. The Presiding Judge of the case, Jamil Rosa de Jesus Oliveira, advocated that “(…) the five-year period is only for the start of the offsetting procedure, and considering that the offsetting has already begun, it is appropriate to utilize the total amount of credits recognized judicially until their exhaustion.”
Another ruling, this time from the 12th Federal Civil Court of Belo Horizonte/MG, in a writ of mandamus filed by Marcos Martins Law Firm for a client in the metallurgical industry, rejected the five-year deadline imposed by the RFB, recognizing that there is no temporal limit for the company to carry out the tax offsetting of its credits. The decision ensures greater stability to the company’s cash flow, which will not be prevented from offsetting its credits unexpectedly.
In his ruling, Federal Judge Daniel Carneiro Machado stated “that it is not reasonable to impose on companies the requirement to consume/offset their tax credits within a certain period of time, if the existence of future debts to offset depends on their size and activity. Such a requirement would constitute blatant arbitrariness without any legal basis, creating a clear restriction on the offsetting of the credit wrongly paid in defiance of the judicial executive title.”
The consolidated understanding represents a significant victory for taxpayers in the interpretation of tax offset legislation and demonstrates the essential support of a legal team for advising companies.
With the new interpretation, companies now have the opportunity to better plan how and when to use their tax credits, which can help alleviate financial pressure, enabling a more strategic and appropriate approach to their circumstances.
