On December 29, 2023, Law 14.789/23 was published, bringing significant changes to the taxation of fiscal incentives. Originating from Provisional Measure 1185/23, known as the ‘MP of subsidies’, the law establishes new criteria for accounting for fiscal incentives in the calculation of federal taxes.
This law changes the way in which fiscal benefits, especially those related to ICMS (Tax on Circulation of Goods and Services) granted by states, are treated in the calculation base of federal taxes such as Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL). With the new legislation, only fiscal incentives used for investments, and not for operating expenses like salaries, can be deducted.
The new law aims to eliminate the exemption of taxes on cost subsidies, maintaining the fiscal benefit only for subsidies aimed at investments. The main goal of this measure is to strengthen the economy and work on reducing the fiscal deficit.
Moreover, the law introduces changes to the Interest on Own Capital (JCP), affecting the way publicly traded companies remunerate their shareholders. The new rule includes resources linked to capital and profit reserves, except for fiscal incentive reserves, in the calculation base of the JCP.
The legislation also establishes that subsidies received should be considered in the calculation base of PIS and Cofins, IRPJ, and CSLL, with the possibility of companies determining a fiscal credit to offset federal taxes or request reimbursement in cash, in the case of subsidies for investments.
The fiscal credit is granted to companies that receive government subsidies aimed at investments, and not operating expenses. The focus is on encouraging activities that promote economic development and business expansion.
The value of the fiscal credit is calculated based on a predefined rate (25% relative to IRPJ on subsidy revenues, as mentioned in the law) applied to subsidy revenues related to the implementation or expansion of the economic enterprise.
It is worth noting that this amount will not be considered in the calculation base of IRPJ, CSLL, PIS, and Cofins, which may result in a significant reduction of the tax burden on companies.
To offset the fiscal credit against taxes payable or to request reimbursement, companies must file a formal request with the Federal Revenue Service, after recognizing the subsidy revenues. The deadline for payment is up to 24 months after the request.
To regularize administrative and judicial liabilities, the law introduces specific rules, including the possibility of a special tax transaction. By opting for the special tax transaction, the taxpayer is recognizing the rules established by the new law. This includes the conditions for qualification and the limits of fiscal credit utilization.
Credits subject to this transaction are tax credits registered in active debt or that are the subject of judicial action, administrative appeal, or objections to tax enforcement. The process covers cases pending definitive judgment until May 31, 2024.
The discounts granted vary according to the down payment and installments chosen by the taxpayer. For payment in up to 12 installments, the discount can reach up to 80%. If the taxpayer chooses to pay in up to 60 installments (the maximum number of installments allowed), the reduction in the consolidated debt amount will be only 5%.
Finally, the law grants a presumed credit of PIS/Cofins to intermunicipal and interstate passenger road transport companies, excluding metropolitan transport. This benefit will be applied from January 1, 2024, to December 31, 2026, with variable percentages over the period (66.67% in 2024 and 50% in 2025 and 2026).”