STJ Validates Retroactive Deduction of JCP


On June 19th, the 1st Panel of the Superior Court of Justice (STJ) decided, while analyzing REsp 1,971,537, that accumulated payments of interest on equity (JCP), which include amounts from previous years, can be deducted from the calculation base of Corporate Income Tax (IRPJ) and the Social Contribution on Net Profits (CSLL).

Interest on equity is a form of profit distribution, similar to dividends. They are provided for in Law No. 9,249, from 1995, and are not mandatory. Shareholders who receive these amounts have a 15% withholding tax deduction. In turn, the company distributing the interest on equity records them as an expense and can deduct them from the calculation base of Income Tax and CSLL.

When the company distributes JCP and deducts them from the tax calculation base for the same year, there is no controversy. The dispute arises when companies “delay” the payments and make them retroactively, calculating interest on equity from previous years. The Federal Union argues that the taxpayer needs to account for interest on equity each calendar year, deducting the year’s profit, even if the payment occurs in the future, and respecting the legal limit (50%).

The rapporteur of the case, Justice Gurgel de Faria, stated that he decided on the case individually due to a consistent legal precedent on the matter. He clarified that both panels have consistently voted in favor of deducting interest on equity, starting from 1997, even regarding fiscal years prior to the year in which the corporate entity’s profit occurred.

This issue had already been considered by the 1st Panel in 2009 and 2019. However, the National Treasury attempted to reopen the discussion, arguing that there was no consolidated legal precedent. Now, after the decisions of both panels, it is not possible to appeal to the 1st Section, responsible for harmonizing public law interpretations.

This STJ decision represents a victory for companies since this interpretation allows for a reduction in their tax burden by using JCP as a means of profit distribution. Furthermore, the harmonization of court interpretations on the subject provides legal certainty to taxpayers so that they can carry out such operations without fear of future tax assessments.


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