The Possibility of Excluding ICMS from the Calculation of PIS and Cofins Credits


After the enactment of Law No. 14,592/2023, there has been much debate about the possibility of excluding ICMS (Tax on Circulation of Goods and Services) from the calculation of PIS (Social Integration Program) and Cofins (Contribution for the Financing of Social Security) credits. This move arises as an attempt by the federal government to reduce revenue losses resulting from the Supreme Federal Court (STF) ruling, known as the “century’s thesis,” which endorsed the removal of the state tax from the calculation base of those social contributions (RE 574.706).

The new controversy revolves around whether the ICMS value should be included in the calculation base for the determination of PIS and Cofins credits. On one side, tax authorities argue that ICMS should not be considered because this tax does not constitute an expense or cost for the company but rather a mere transfer of funds since the tax is passed on to the final consumer. On the other hand, taxpayers argue that ICMS is part of the cost of the goods and, therefore, should be considered in the calculation of PIS and Cofins credits.

The STF’s position in the judgment of RE 574,706 was that ICMS does not form part of the calculation base for the incidence of PIS and Cofins because it does not become part of the taxpayer’s assets, constituting only a cash inflow or an accounting transit to be entirely passed on to the state treasury.

While the STF’s decision focused on the calculation base for the collection of PIS and Cofins, the new law changes the calculation base for the credits of these contributions, which is a distinct issue from that addressed by the supreme court.

PIS and Cofins are federal taxes that apply to a company’s gross revenue. In most cases, these contributions are calculated on a non-cumulative basis, meaning that the company can deduct the amount due from credits generated from certain expenses incurred.
Under the non-cumulative system of calculating PIS and Cofins, companies have the right to credits on certain expenses and costs that are later used to reduce the amount owed for these taxes. This system is referred to as “base against base” or an indirect subtractive method.

Due to the non-cumulative nature of PIS and Cofins, taxpayers are allowed to deduct the amount of the tax paid in previous stages of the production chain, reducing the amount to be paid in the subsequent stage. However, the new law, regarding the right to credit for acquisitions, distorts the principle of non-cumulativity as it confuses the rule for calculating the credit with the rule for calculating the debit, which are separate rules. Moreover, offsetting is merely the way in which the right to credit is exercised, and the effectiveness of non-cumulativity is only realized when offsetting is carried out.

For these reasons, it is possible to legally challenge the application of these new provisions introduced by Law No. 14,592/2023 to ensure the maintenance of full PIS and Cofins credits without a reduction in the amount related to ICMS.


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