Tax Bulletin of the Administrative Council of Tax Appeals

Transcription

1 Tax Bulletin of the Administrative Council of Tax Appeals specific tax report Newsletter no. 52 Year V July/ we enjoy and believe in our work Dear Readers: In this 52 nd edition of our Tax Bulletin of the Administrative Council of Tax Appeals ( CARF ), we will comment on a decision in which the Superior Chamber of this Court evaluated the concept of input for credits purposes of the contribution to the Employee Profit Sharing Program ( PIS ) and the Contribution to the Social Security Funding ( Cofins ) in the noncumulative system. We have also analyzed a case in which the Council, in an administrative proceeding, made the adjustment of the tax bases of the Corporate Income Tax ( IRPJ ) and of the Social Contribution on the Net Income ( CSLL ) to the estimated profit system, originally recorded based on the taxable income. Enjoy your reading. Non-Cumulative PIS and Cofins Credits - Concept of Input COFINS. GEAR. INPUT. CREDIT RIGHT. ARTICLE 3 LAW /03. The expenses, denominated input, deductible from the non-cumulative Cofins, are those directly related to the taxpayer s production and that participate and affect the universe of revenues taxable by such social contribution. The specific gear imposed by the Government to the food processing industry a mandatory sanitary requirement is an inherent input for the production of the poultry industry and may therefore be discounted from the mentioned tax computation. Public Prosecutor s Special Appeal Denied. The appellate decision whose synthesis is transcribed above refers to the controversy concerning which expenses are to be considered input, for Cofins credit purposes. In this case, the taxpayer, a poultry industry, sought the recognition of the right for the refund of credits of such contribution, calculated on the expenses, among others, with gear of mandatory use by employees in the production of food. The content hereof belongs to SOUZA, SCHNEIDER, PUGLIESE E SZTOKFISZ ADVOGADOS law firm and is destined to the firm s clients. Total or partial reproduction without prior authorization is forbidden. In case you no longer wish to receive this tax bulletin or wish to include another person to receive it, please send an with such request to ssplaw@ssplaw.com.br.

2 In analyzing the taxpayer s dissatisfaction with the refusal of these credits, the judgment authority of the 1 st tier court upheld the rejection, as it viewed that this specific gear would not be considered input, since what would qualify a given asset as input for Cofins credit purposes would be its integration to the end product, that is, granting a more restricted interpretation to the term input, as per the legislation of the Tax on Manufactured Products ( IPI ). In a voluntary appeal, the taxpayer reaffirmed its right to the intended credit, defending, in sum, that the production to which article 3 of Law no. 10,833/2003 refers is not limited to transformations only, but comprises the entire production process (...). CARF s Judgment Panel, after examining this appeal, partially granted it in this regard, by majority vote, so as to recognize the right to the refund of the Cofins credits on expenses with gear, based on the fact that all of these expenses would be directly connected to the manufacture of the goods, and moreover, they would derive from a mandatory sanitation requirement of the Government. In disagreement, the Attorney General Office of the National Treasury then filed a Special Appeal against the tax legislation, claiming that the appealed appellate decision, viewing that the gear would be input as it derives from a sanitation requirement for food production, had violated article 3 of Law no. 10,833/03 and article 66 of Normative Rule ( IN ) SRF no. 247/02, amended by IN SRF no. 358/03, since what would determine a given asset as input is its integration to the end product, and not the fact that it arises from sanitation requirements. The case records were then sent to the 3 rd Panel of the Superior Chamber of Tax Appeals ( CSRF ). Examining the issue, the Reporting Councilor started her opinion pointing out that the contribution to the PIS and Cofins are taxes imposed on the gross revenue earned by the taxpayers. Therefore, the law authorizes the discount of credits corresponding to the amount resulting from the application of the tax rate on certain expenses incurred by the taxpayer in the acquisition of goods and services for the performance of this taxable revenue. In his view, these expenses, denominated input, are then all expenses directly related to the taxpayer s production and that participate in and affect the taxable revenues by such contributions. The Reporting Councilor then rules out the concept of input brought by IN SRF no. 247/02 which limited the extension of the term to the interpretation given by the IPI legislation. He states that this concept would be entirely unsuitable for the PIS and Cofins, to the extent that it is undeniably associated to the substantiality of the IPI, which is the manufactured product, and not the taxpayer s revenue, as imposed, so they are contributions levied on the latter, not the former situation. The Councilor, however, also ruled out the extensive concept of input applicable to income tax, whose substantiality is equally different. 2

3 Upon these clarifications and by regarding that that gear imposed by the Government on the food processing industry is a sanitary requirement to be complied with for the production of meat, the Councilor then viewed it is an irrefutable case of input inherent to the poultry industry production. Another Panel Councilor, Gileno Gurjão Barreto, presented his opinion and ruled likewise, adding that for the purpose of PIS and Cofins credits, the provision of services may be considered as input, therefore not limited to the physical elements composing the product, which may lead to the conclusion that Laws no. 10,637/02 and 10,833/03 have extended the definition of input contained in the IPI legislation. Another fact to reinforce this conclusion affirmed the Councilor is that fuels and lubricants were mentioned as examples of input by the PIS and Cofins legislation, though not always directly used in the productive process. On the other hand, along Marco Aurélio Greco s 1 lines of thought, he stated that for the expense to be considered input, it must meet all the requirements of essentialness and necessity of the productive process. Therefore, it is not sufficient for the goods or services to be useful in the productive process or rendering of service: it must be essential and there must be proof thereof. As a supplement, it is possible to verify whether its subtraction results in the impossibility of this service rendering or production, that is, whether it affects the 1 Cf. Concept of input in light of the PIS/COFINS legislation, Revista Fórum de Direito Tributário - RFDT, ano 1, n. 1, jan/fev.2003, Belo Horizonte: Fórum, company s activity or results in the loss of quality of the product or service resulting therefrom, according to Marco Aurélio Greco. Lastly, Councilor Susy Gomes Hoffmann also presented her opinion, stating that there is no single answer for all the cases, meaning it will always be necessary to verify, on a case by case basis, the relation between the produced goods or services and those used for their production. By analyzing this case in question, the Councilor concluded that the use of a specific uniform required by law is an inherent activity for the production of the goods, since without this uniform, the taxpayer would not be able to regularly carry out its activities, as the goods to be produced would not reach a legal requirement to be made available for their sale. Based on the above, the members of the CSRF s 3 rd Panel, by majority decision, dismissed the Special Appeal of the National Treasury, in order to recognize the taxpayer s right to the PIS and Cofins credits on the specific gear imposed by law, considered as input for its productive activity. SOUZA, SCHNEIDER, PUGLIESE AND SZTOKFISZ ADVOGADOS is available to its clients should they have any questions on the above decision. IRPJ and CSLL Tax Bases Adjustment pursuant to Estimated Profit Rules BOOKKEEPING. CIRCUMSTANCE NOT GRANTING CREDIBILITY TO 3

4 ACCOUNTING RECORDS ACCOUNTING RECORDS. DECLASSIFIED BOOKKEEPING. DETERMINED PROFIT. Credibility may not be granted to bookkeeping when it is verified, substantively, that ti does not reflect the reality of the business and banking transactions made by the company. Article 47 of Law no. 8,981, of 1995 when using the expression that profit will be determined, in the cases it specifies, does not grant the option to the Tax Authorities, but instead an imposition as to the form of taxation. Therefore, upon verifying that the bookkeeping does not record most of the operations carried out by the company, the profits are then determined by the authorities for purposes of ascertainment of the IRPJ and CSLL. It is a case of assessment notices relative to IRPJ, CSLL, PIS and Cofins of the calendar years of 1998 to 2001, based on the taxable income system and on the omission of revenues arising from bank deposits, whose origin was not proved by the taxpayer through proper and appropriate documentation, pursuant to article 42 of Law no. 9,430/96. In its objection, in short, the taxpayer sought the ruling out of the assessment of the income tax based exclusively on bank statements, claiming inexistence of a causal link between the deposits and the omission of earnings, and claiming that there had been an illegal breach of bank secrecy by the Inspection. Furthermore, it claimed it had the tax and accounting books required by the tax legislation containing the deposit amounts subject matter of the assessment, to provide evidence to its favor. Finally, it then required expert accounting examination and defended the mandatory requirement of profit estimation, ruling out the use of taxable income rules for the ascertainment of tax credits, as the Inspection had not considered its accounting documents valid and equally not considered the cost of the sold goods (CMV) in the ascertainment of the taxable income. In analyzing the case, the Judgment Office rejected the taxpayer s arguments and granted the assessment made on the revenues considered omitted, in accordance with article 42 of Law no. 9,430/96. The taxpayer, in a voluntary appeal, claimed once more that the Inspection, in possession of its accounting books, failed to examine them properly, and that for this only, considered as omitted revenue the amount of the deposits in those bank accounts. The taxpayer also claimed that the Inspection should have applied the audit procedures by sampling and tests in order to verify the origin of the revenues. In addition, it again stated that as the Inspection had deemed its accounting document to be invalid, it should then have determined the profit. In examining the case, CARF s Judgment Panel initially converted the decision into an investigation, in order to clarify whether the deposits were recorded by the taxpayer or not, as so claimed by the taxpayer, who also attempted to demonstrate it through copies of sheets from Accounting Journals and Ledgers. 4

5 The investigation demonstrated that revenues had been recorded, but in a much lower amount than the sum of the bank deposits made into the taxpayer s accounts. After learning of the investigation report, the taxpayer claimed double taxation of amounts, with regard to the portion of deposits that had been recorded, requesting for this reason the cancellation of the assessments. The records were again sent to the CARF, which determined a new investigation in order to verify the CMV, since the ascertainment of the taxable profit had been carried out through the taxable income system. A report was prepared from this investigation, stating the taxpayer s irregular accounting recording and setting the annual amounts of the CMV based on the Statement of Information and Ascertainment of the Tax on the Circulation of Goods and Services ( ICMS ), for purposes of taxation b the taxable income method. After becoming aware of this report, the taxpayer reiterated its request to cancel the tax assessment notices. Resuming the examination of the case, the Reporting Councilor pointed out that according to the tax investigations, it was clear that the taxpayer s accounting records were not valid. Then, due to the taxpayer s inability to justify the difference between the recorded revenues and the deposits, the Reporting Councilor stated that within the administrative judgment the estimated profit system should be applied to the case for the determination of the IRPJ and CSLL tax basis, as the determination of profits: (i) is an imposition, not an option, and must be performed voluntary by the judges in their review of the tax credit assessment; (ii) is not a penalty but an alternative for the computation of the due taxes; (iii) is not a type of taxation, but the determination of the tax basis due to the impossibility of using the taxable income or estimated profit; and (iv) profit determination does not reach the core of the tax liability and does not change the verified infractions, and may not increase the original requirement. Based on such criteria, the Reporting Councilor points out and attaches precedents of the Panel in this regard that the adjustment of the tax bases of the voluntary assessment to the estimated profit criteria is supported by the tax legislation and does not imply any legal criteria change, which also prevents the charge of the IRPJ and CSLL from reaching the revenues, when they should be made on the result. Due to the foregoing, the Reporting Councilor partially granted the appeal in order to subtract the amounts already subjected to taxation by the taxpayer from the tax basis and adjust the tax bases of the IRPJ and CSLL to the estimated profit system to 9.6% of the total revenue, as requested by the taxpayer itself, a conclusion that was followed by the other Panel Councilors. In other words and we call the reader s attention to this the Councilors viewed that as the profits were not estimated when they should have been so, the assessments may not be cancelled, but rather, the assessment notice should be rectified by the judgment authority. 5

6 SOUZA, SCHNEIDER, PUGLIESE AND SZTOKFISZ ADVOGADOS is available to its clients should they have any questions on the above decision. Team responsible for preparing the Tax Bulletin of the Administrative Council of Tax Appeals: Igor Nascimento de Souza Henrique Philip Schneider Eduardo Pugliese Pincelli Cassio Sztokfisz Fernanda Donnabella Camano de Souza Diogo de Andrade Figueiredo Bruno Baruel Rocha Rafael Fukuji Watanabe Rodrigo Tosto Lascala Ana Paula Medeiros Costa Júlio César Soares Murilo Bunhotto Lopes Laura Benini Candido Marina Lee Rua Cincinato Braga, 340, 9º andar São Paulo/SP - Phone: (55 11) Brasília Shopping SCN Quadra 5, Bloco A - Torre Sul 14º andar Sala 1406 Brasília/DF - Phone: (55 61) Flávio Eduardo Carvalho (flavio@ssplaw.com.br) Rafael Monteiro Barreto (rafael@ssplaw.com.br) Wilson Rodrigo Vieira da Silva (wilson@ssplaw.com.br) Vítor Martins Flores (vitor@ssplaw.com.br) Sidney Kawamura Longo (sidney@ssplaw.com.br) Letícia Brandão Tourinho Dantas (leticia@ssplaw.com.br) 6