Investment subsidies granted through tax exemptions or reductions may be excluded from the calculation basis of the PIS and Cofins contributions. This is the guidance of the Brazilian Federal Revenue Service (Receita Federal) in Tax Ruling Solution No. 253/2023.
See below what you need to know to apply this reduction in your company:
What are investment subsidies? A subsidy is aid or a benefit granted by the state government to companies (industry and commerce) with the aim of stimulating and/or developing a specific economic activity or niche, in order to keep the prices of the products sold by them below free-market prices. Such aid is granted through tax benefits such as ICMS reductions, presumptive credits, and/or exemptions.
What are the requirements for using the exclusion? For the PIS and Cofins exclusion to be admitted, the subsidy must have been granted as an incentive for the implementation or expansion of an economic undertaking, as provided for in Article 30 of Law No. 12,973 of 2014.
Is a tax incentive reserve required? Unlike the IRPJ and CSLL exclusion, for PIS and Cofins there are no legal provision linking such exclusion to the recording of subsidies in tax incentive reserves (the profit reserve referred to in Article 195-A of Law No. 6,404 of 1976).
How to recover these amounts? It is possible to recover PIS and Cofins amounts overpaid in the last 5 years. For this purpose, the EFD-Contribuições filings must be rectified for the periods in which the overpayment occurred.
If your company holds investment subsidies through ICMS tax benefits, it is essential to carry out this review so that such amounts are excluded from the PIS and Cofins calculation basis, thereby reducing the tax burden on the operation.
