The company that wants to go to court for the recovery of overpaid (or unduly) taxes cannot waste time. The success of this endeavor depends largely on distributing the lawsuit before it reaches the Supreme Court (STF), in the so-called general repercussion. It is also directly linked to the possible approval of the Tax Reform by the National Congress, which will change the composition and form of tax collection.
Waiting for jurisprudence to, for example, avoid expenditures such as the payment of succession for lawyers, may cost more than assuming the investment and get ahead.
Some good examples of matters of broad interest that are at an advanced stage of processing are the exclusion of ICMS (Tax on Circulation of Goods and Services) from PIS and Cofins, which was favorably judged by the STF and has the request for modulation pending, in addition to the judgment of the action for exclusion of ISS from PIS and Cofins, which has already been commenced, but is suspended with a request for review by Justice Dias Toffoli.
We also have at least two theses on invoicing of great relevance that have not yet been ruled, but should be judged by the end of the year, such as: the exclusion of PIS and Cofins from the calculation basis itself.
In order for companies to understand the importance of advancing with the Tax Reform and the arrival of the guidelines at the STF, let us go to some concepts.
The Tax Recovery Action is used to obtain from the tax authorities the refund of taxes paid in excess by a legal entity, and which were established illegally/inconstitutionally by the government. There are different ways for the government to establish taxes illegally/inconstitutionally, as in the case where it changes the basis for calculating a tax by decree or ordinance, when it can only be changed by law.
Through this action it is possible to recover the last five years of taxes and still seek a future tax reduction. As the matters are recurring and are brought up for discussion at the STF, the court began to judge them on the basis of their general repercussion and made it even more crucial to identify the taxes to be recovered and that of the action.
The general repercussion is a criterion for the admissibility of an extraordinary appeal, an appeal responsible for bringing the discussion of a matter to the STF. According to the new Code of Civil Procedure (CPC), for the purpose of general repercussion and for the STF to deal with a certain issue, it must bring issues that are relevant from an economic, political, social or legal standpoint to the community, going beyond the subjective interests of the parties directly involved in the process.
In tax matters, there are usually three instances in which discussions take place: the first, where the judge renders the judgment; the second, where the judgment is rendered by the judge; and the third, where the STF justices have jurisdiction.
Once the general repercussion of the STF has been identified, the Supreme Court analyzes the merits of the issue and the decision arising from such analysis is subsequently applied by the lower courts in identical cases.
It is common for tax theses to reach the judgment of STF justices because the discussions they address tend to have a relevant impact on the economy because they deal with expressive values, and because they offend against the Federal Constitution.
The modulation of the effects of the decisions, in turn, a subject that is still discussed at the Superior Court of Justice (STJ) and at the STF itself, is intended to see such effects applied to events before and after the trial. While the tax authorities request that the final court decision be valid only for the future, in tax reorganization actions the parties usually request that it be applied to events that have occurred also in the past five years.
For this reason, it is important that companies distribute the shares before the STF judgment and before the Tax Reform.
Moreover, these tax issues will soon be addressed (some already ruled by the STF and STJ) and companies run the risk of losing the opportunity to seek refund of past taxes, which are often very significant amounts.
* Article written by Guilherme Rezende - tax attorney of the Pine Group