The Brazilian Supreme Court (STF) confirmed the legality of charging PIS and COFINS on revenues from leasing movable and immovable assets, in a majority decision of 7 votes to 3. The Plenary of the STF decided that this form of taxation is admissible since the original wording of Article 195, Section I, of the Federal Constitution, even before Constitutional Amendment (EC) 20/1998.
The justices followed the dissent proposed by Justice Alexandre de Moraes, who advocated a broad interpretation of the concept of turnover, covering all business revenues. According to Moraes, such an interpretation was already possible before EC 20/1998, contrary to the understanding of Justices Marco Aurélio and Luiz Fux, who considered the charge valid only after the amendment.
The approved thesis establishes that the incidence of PIS and COFINS on leasing revenues is constitutional when such operations constitute a business activity of the taxpayer, aligning with the concept of turnover or gross revenue, which encompasses all revenues from business activities.
The decision of the STF, in recognizing the legality of charging PIS/COFINS on leasing revenues, reflects a broadened interpretation of turnover, with implications for corporate tax planning since the discussion about what constitutes a “relevant business activity” for tax purposes may give rise to new litigations given the subjectivity of the concepts used in the decision.