The Brazilian IRS has new directives that are especially important to financial services companies. This is due to a recent regulatory ordinance published by the Ministry of Economy. It is now mandatory for all tax authorities to follow various Administrative Fiscal Court “precedents” (very relevant in Brazil). Some of them are favorable to taxpayers, others are not.
For instance, now it is settled that financial institutes can deduct discounts granted to clients when renegotiating credits from their taxable profit (Actual profit method). Also, it is consolidated that Corporate tax (IRPJ) and Social Contribution on Net Profit (CSLL) are not due by Credit Cooperatives over profits related to their financial investments. On the other hand, there are also unfavorable “precedents”, such as a longer term for tax authorities to levy taxes in some circumstances.
The main point is that there will be no supervision, proceeding and imposition of penalties by tax authorities regarding these specific cases due to these now binding “precedents”. This is extremely important because it brings legal certainty for companies in their operations and negotiations and also avoids litigation.