STF Upholds the 30% Limit on Tax Loss Offset for Extinct Companies


The 2nd Panel of the Brazilian Supreme Federal Court (STF) reaffirmed the constitutionality of the 30% limit for offsetting tax losses from previous years, applicable in the calculation of the Social Contribution on Net Profits (CSLL) and Corporate Income Tax (IRPJ) in cases of company extinction, even through incorporation. The judgment took place in a virtual setting and resulted in a 4-1 vote, with the majority of the justices supporting the limit.

The limit in question is a mechanism that restricts companies from using more than 30% of the accumulated tax loss to reduce the amount payable in federal taxes. This limit, established by Laws 8,981/95 and 9,065/95, has been contested by taxpayers who argue that the STF did not address cases of company extinction when ruling on the matter in 2019 (RE 591,340 – Theme 117 of general repercussion).

Most justices followed the opinion of the rapporteur, Justice Nunes Marques, who stated that the constitutionality of the limit had already been established by the STF in the ruling on Theme 117. Justices Ricardo Lewandowski, André Mendonça, and Gilmar Mendes concurred with the rapporteur’s vote.
Justice Edson Fachin voted against the limit, arguing that it contradicts the principles of equality, the ability to contribute, and the prohibition of confiscation since it allows the tax authorities to tax amounts that do not correspond to the taxpayer’s net income.

The decision, although not recognized as having general repercussion, is relevant to the specific case at hand and reflects the position of five STF justices. It is worth noting that in October 2022, the 1st Panel of the STF determined that the discussion on the 30% limit is infraconstitutional and therefore not within the competence of the STF for analysis (RE 1,294,800).

To achieve a uniform understanding within the STF on this issue, it would be necessary for a case with general repercussion to be brought before the plenary of the STF, where all justices would have the opportunity to vote and assess the merits.

Finally, it should be noted that the issue has already been unfavorably settled for taxpayers by the Superior Court of Justice (STJ), both in the 1st Panel (REsp 1,805,925/SP) and the 2nd Panel (REsp 1,925,025/SC), leaving only the STF to attempt once again to reverse the jurisprudence against the interests of taxpayers.


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