Mainly for foreign investors it is worth to notice that in Brazil is normal for a company to challenge a taxation in the Courts. It is a praxis that comes before an audit of the tax authorities.
In a way this is positive, because it can increase the value of the company in the sense that it possibly will have the reimburse of taxes.
Several taxes have structural problems, mainly disrespecting the due process of law, or other rules or principles of the legislation. So, the path to take is to challenge the tax in the Courts.
Last week, the judgment of the so-called “thesis of the century” was finally concluded by the Supreme Court (STF). The result of the merit was favorable to the taxpayers in the sense that the ICMS portion of the PIS/COFINS contribution calculation basis was excluded.
The main thing to be highlighted in this judgment is another matter. Related to the taxpayers’ stance when they understand that a tax is unconstitutional/illegal. The STF applied the modulation of the effects of its decision. This means that the tax was deemed unconstitutional only for the future, as of the final judgment on the merits.
But the most important criterion is that the tax unduly paid in the past will only be returned to those taxpayers who filed lawsuits discussing this issue before the courts. For those who just waited the outcome of the Supreme Court, without having a lawsuit, they will not be able to get back the taxes paid.
So, now, there is an even higher incentive to the company’s challenge the taxes that they found illegal/unconstitutional in the Courts. If they do not, they will keep their rights but not the money.