Accrued ICMS credit – Reduction on Corporate Income Tax and Social Contribution Tax on Net Profit paymentSeptember, 2008An important decision issued by the Superior Court of Justice’s first panel was published recently and set a precedent for companies with accrued ICMS credit (Taxation on circulation of goods and services) arising from transactions regarding export of goods, so that they may reduce the payment of the “IRPJ” (Corporate Income Tax) and “CSLL” (Social Contribution Tax on Net Profit). The decision has benefited export companies and allowed the registry of the non-utilized ICMS credits as part of the costs. Therefore, since the IRPJ and CSLL tax basis are the earnings, the costs increasing reduce the company’s earnings, so they IRPJ and CSLL burden will decrease. In the decision, the reporting judge José Delgado stated that the export company in the case analyzed is exempted from ICMS’s payment. However, it is accruing credits constantly, every month, with no reimbursement of the tax cost by the State. The ruling of the Law which does not allow the ICMS to be considered as cost, gives rise to the taxation of profits that do not exist, either related to IRPJ or to the CSLL. The Income Tax Regulations (Decree nº 3,000/1999) prohibit the inclusion of reimbursable taxes, at least, theoretically, such as the ICMS and the IPI (Excise Tax), which are taxes over the value added. The possibility of using the accrued ICMS credits as part of the cost will benefit the cash flow as well as it contributes to tax efficiency associated to tax credits. the According to a research held in 2007 by the Instituto de Estudos para o Desenvolvimento Industrial – Iedi (Study for the Industrial Development Institute), the companies’ accrued ICMS credits was, at that time, approximately BRL 15 billion. According to information provided by members of the Federal Government, every 51 minutes a new tax ruling is enacted. The aforementioned decision although is not unquestionably, however, is an important issue to be discussed with managers from a Corporate Governance perspective. Considering the complexity of our legal system and keeping in mind that this decision is not definitive, we have in this situation an important subject to be discussed with the managers of the companies through a Corporate Governance perspective. For further information please contact: Roberto Cunha, + 55 11 2183-3119, rcunha@kpmg.com.br Roberto Alves da Cunha |
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