Dias Toffoli reiterated that the STJ had exercised its constitutional competence when the Court understood that such a matter cannot be raised in a motion to stay tax execution
In these Tax Law newsletter you will find:
- STF decides that discussion on tax offsets in motion to stay executions should be ruled by STJ's competence
- STF interrupts judgment on payroll tax substitution
- STJ decides that credit enrollment request does not suspend the statute of limitation for tax credit offset
- STF to rule the "30% limitation" for offsetting losses (nols) in the dissolution of legal entities
STF decides that discussion on tax offsets in motion to stay executions should be ruled by STJ's competence
The Brazilian Supreme Federal Court (STF) has ruled that it is not within the Court's competence to analyze whether tax offsetting can be alleged in the context of motion to tax execution. Justice Dias Toffoli, held that it is a matter of infraconstitutional issue, which has already been the subject of a decision by the Superior Court of Justice (STJ).
The decision was made in Petition for Noncompliance with a Fundamental Precept (ADPF) No. 1,023, filed by the Brazilian Bar (OAB) to challenge the interpretation of Article 16, Paragraph 3, of the Tax Execution Law. In the lawsuit, the Bar argued that the restriction on the allegation of tax offsetting in executions would violate principles such as equality, due process of law, economy and procedural celerity, and the prohibition of denial of justice.
In analyzing the case, Minister Dias Toffoli reiterated that the STJ had already exercised its constitutional competence in the case of Special Appeal (REsp) 1,795,347, when the Court understood that such a matter cannot be raised in a motion to stay tax execution.
STF interrupts judgment on payroll tax substitution
The Supreme Federal Court (STF) has suspended the judgment of the Declaratory Action of Unconstitutionality (ADI) No. 7,633, which discusses the provisions of Law No. 14,784/2023 that, among other measures, authorized the extension of payroll tax substitution for 17 sectors of the economy until 2027. The suspension was caused by a request by Justice Luiz Fux to further analyze the case.
The substitution regime allows these companies to pay the social security contribution upon a percentage of their gross revenues, in exchange to the percentage upon the payroll.
In the ADI, filed by the Federal Government, the Justice Cristiano Zanin, had already granted a preliminary injunction to suspend the effectiveness of sections of the aforementioned Law 14,784/2023 and thus suspend the extension of payroll tax reduction.
Zanin accepted the Federal Government's argument that the Law did not adequately demonstrate the financial impact of the measure, as required by the Federal Constitution, the Fiscal Responsibility Law, and the Budgetary Guidelines Law.
Until the request for view, five other Justices had cast votes following the Rapporteur, that is, maintaining the suspension of the tax reduction.
In parallel, the Government, the Congress and the representatives of the sectors involved are negotiating an alternative model. Most likely scenario involves a gradual return to the payroll taxation in the next few years.
STJ decides that credit enrollment request does not suspend the statute of limitation for tax credit offset
The decision was rendered in the judgment of Internal Appeal in the case of Special Appeal No. 1,729,860/SC.
The discussion originated from a Writ of Mandamus filed by the taxpayer to secure its right to present the claim to offset resulting from a judicial decision. The Offsetting Statement (DCOMP) had been rejected by the Brazilian Federal Revenue (RFB) because five years had elapsed between the final judicial decision and the transmission of the DCOMP.
The Panel determined that during the period between the credit enrollment request arising from a judicial action and the acknowledgment of its definitive approval, the prescription period for submitting the Offsetting Statement is suspended, but not interrupted.
In practice, therefore, the STJ's understanding is that taxpayers must, within five years from the final judgment of the action recognizing the tax undue payment, submit the credit enrollment request, and upon approval, transmit the corresponding offsetting statement.
In parallel, there are still other discussions before the Courts of Law regarding the five-year term's legality.
STF to rule the "30% limitation" for offsetting losses (nols) in the dissolution of legal entities
Such a limitation was created as a way to reduce the impact of the offsetting of previous losses with subsequent profits of the legal entities, in the assessment of the income taxes. Only 30% of the profits can be offset with previous accrued losses.
The Supreme Court (STF) has started the judgment of an Internal Appeal in the case of Extraordinary Appeal No. 1,425,640/RS, which discusses the constitutionality of such limitation in the context of dissolution of the legal entity. Taxpayers argue that the limitation would result in an illegitimate taxation upon the profit since the company would not be able to use the remaining losses in the future.
The same court had already examined a similar case when ruling on Extraordinary Appeal No. 591,340/SP (Theme No. 117 of General Repercussion), where the Court concluded the constitutionality of the 30% limitation in normal circumstances.
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