The Brazilian Revenue ServiceIRS) have not yet decided on how to apply the concept of inputs for purposes of calculating PIS/COFINS credits under the non-cumulative regime.
Even after the ruling of the Superior Court of JusticeSTJ) on April this year, which theoretically ended the discussion about the concept of input for PIS/COFINS, the Brazilian Tax Authorities are adamant in changing their understanding on the matter.
The STJ has defined that all items considered essential, indispensable or relevant for the company’s economic activity are entitled to PIS/COFINS credit.
Using this concept, the IRS issued on June 27, 2019 Consultation Solution COSIT No. 228 acknowledging the right of the transport company to use the credits of the contributions on the expenses with automotive safety of freight vehiclestracking/monitoring).
Contrary to this decision, on the same day the IRS issued the Consultation Solution DISIT No. 7039, prohibiting the use of credits on the hiring of surveillance services by legal entities in general.
In other words, the IRS feel it has the authority to determine which taxpayers can survive without surveillance and security services and which taxpayers really need such services.
The fact is that this environment maintains a serious legal uncertainty as to whether or not PIS/COFINS credits can be used. As a result, companies must take a closer look at this point, so as not to expose themselves to unnecessary risks or even leave money on the table.
By Paola Ayres Sarraf, lawyer at Candido Martins Advogados