On December 11, the 1st Panel of Brazil’s Superior Court of Justice (STJ) ruled to uphold the inclusion of PIS and COFINS contributions in the calculation base for ICMS (State Value-Added Tax). The unanimous decision, issued under the system of repetitive appeals, carries binding effect for lower courts, except for the Federal Supreme Court (STF).
Justice Paulo Sérgio Domingues, the presiding judge, emphasized that current legislation does not explicitly provide for the exclusion of PIS and COFINS from the ICMS tax base. According to Justice Domingues, the principle of strict legality requires that any exclusions be expressly stated in legal provisions. In the absence of such provisions, the court established the legal precedent that “including PIS and COFINS in the ICMS tax base complies with the law in cases where the tax base is the transaction value, as it constitutes an economic pass-through.”
The Justice also noted that this decision does not affect the overall tax burden, as the inclusion of these contributions in the ICMS tax base is a well-established practice. Since there was no shift in legal interpretation, there was no need to modulate the decision’s effects, allowing the government to retroactively enforce the tax collection.
Justice Domingues rejected the application of the STF’s ruling in “Theme 69” (commonly referred to as the “case of the century”), which excluded ICMS from the calculation base of PIS and COFINS. The differentiation lies in the ICMS having both an economic and a constitutionally defined legal incidence, while PIS and COFINS are purely economic and do not directly apply to the final consumer.
Although this STJ ruling sets an important precedent, there is still room for motions for clarification and potential appeals to the STF. The debate involves constitutional principles such as legality and contributive capacity, which may warrant further review by the Supreme Court.