The Brazilian Internal Revenues Services (Receita Federal) has new directives that are especially important to companies with environmental responsibilities and their investors.
It is now settled that expenses with the treatment of wastewater, sewage and waste in general give right to credits derived from the Federal gross receipt contributions (known as PIS and COFINS).
Now, companies can recover tax credits from the past 5 years directly in the IRS without further discussions, which is a major victory. In practice, the economic effect is like these expanses are being deducted from the contributions’ calculation basis.
The main reason for it is that complying with green responsibilities is mandatory to some sorts of businesses. Without it, the company wouldn’t be filing the basic legal requirement for activities with potential environmental impact: environmental licensing. And, more than that, it is an environmental crime not to do it.
The particular case concerned a leather industry, but it is important to notice that the IRS adopted the following criteria: the expense needs to be essential to the activity to generate tax credits from PIS/COFINS – as ruled the Brazilian Superior Court of Justice (that has the last word in federal matters), which covers mandatory expenses of the specific industry.
Therefore, this directive may be extended to other environmental mandatory expenses and also cover legal obligations of other highly regulated industries, as the agri-food, energy, oil and gas industries. It is important to verify internally if there are credits to be recover from the past 5 years and the legal feasibility of it.