Tax | Income Tax on SELIC and The Important Role of Judicial Discussions for the Competition of Brazilian Companies

It is very important that the entrepreneur and the investor accept the role of tax litigation in their day-to-day business. That they get used to dealing with lawsuits and their consequences, for themselves and for their competitors. 

It is known that taxation in Brazil is complex. There are many taxes that are discussed in court, about their legality and constitutionality. Even so, many companies, for various reasons, choose not to file suits in court. 

Unlike other countries, it is common in Brazil for companies to actively seek the Judiciary. Some investors are impressed by the amount of litigation by Brazilian companies. Without looking for the motivation behind this, the fact is that there is really a large volume of tax litigation. 

Thus, companies must reassess their internal policies of not seeking the Judiciary. Because, if they don’t, much more than miss an opportunity to collect less taxes, companies lose competitive space for their competitors. 

Last week, the Supreme Court set a precedent by ruling out the incidence of IRPJ and CSLL (34%) on the amount received by companies as Selic rate (default interest and monetary restatement) in the repetition of the tax overdue. 

In other words, when companies earn the right to receive back a tax unduly paid in the last 10 years, for example, they receive back (i) the tax amount, plus (ii) the SELIC rate. This SELIC amount tends, in some cases, to be greater than the amount of the tax to be returned. This amount received was subject to the incidence of 34% of taxes. It is precisely this incidence that the Supreme Court has just ruled out. 

Our experience shows that, in a pragmatic way, it is up to the entrepreneur and the investor to monitor and handle tax discussions in court. Acting in this way, you either stay in balance with your competitors, or you can even achieve a competitive advantage over those companies that don’t.


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