Companies that benefit from ICMS tax incentives may continue to exclude these amounts from the IRPJ and CSLL tax bases, even if the retained earnings are recorded late.
This was the ruling of the Superior Court of Justice (STJ) in Special Appeal n. 2.272.248.
Under Constitutional Law n. 160/2017, ICMS tax incentives began to be treated as investment subsidies.
Following this change, the exclusion of these amounts from the IRPJ and CSLL tax bases became contingent upon compliance with the requirements of Article 30 of Law n. 12.973/2014, including the establishment of a retained earnings reserve.
Prior to that, these incentives were classified by the Federal Revenue Service as operating subsidies and were recorded in the income statement, which waived the requirement to establish a retained earnings reserve. For this reason, many companies had not established the reserve at the appropriate time.
In ruling on the dispute, the STJ allowed for the retroactive establishment of the retained earnings reserve, thereby preserving the right to exclude these amounts from the IRPJ and CSLL tax bases.
Regarding this issue, we highlight 3 points that deserve attention:
1. Investment subsidy vs. operating subsidy: An investment subsidy is an incentive provided by the government to encourage the establishment or expansion of a business. An operating subsidy is an incentive that merely helps cover a company’s current expenses, without being tied to an investment project. This distinction is important because only investment grants can be excluded from the tax base for IRPJ and CSLL. Operating grants are taxed as usual. Prior to LC 160/2017, tax authorities treated a significant portion of ICMS incentives as operating grants. The law changed this classification, treating them as investments, regardless of how the company accounted for them in the past.
2. Recording in Retained Earnings: Recording the grant in retained earnings is a requirement for excluding grants from the IRPJ and CSLL tax bases (Art. 30 of Law N. 12.973/2014). The amount of the incentive must be allocated to shareholders’ equity in a specific reserve and may not be distributed to shareholders while this allocation remains in effect. It may be used to offset losses or increase capital. Failure to comply may result in the loss of the tax benefit and the assessment of taxes.
3. Limits on Retroactive Adjustments: Retroactive accounting adjustments are not automatic and are permitted only in specific situations recognized by the Superior Court of Justice (STJ). Their validity depends on the good faith of the company, which followed the administrative guidelines in effect at the time of the tax assessment. Nevertheless, the tax authorities retain the power to audit
The STJ’s decision reinforces that the untimely establishment of a profit reserve does not, in and of itself, preclude the exclusion of ICMS tax incentives from the IRPJ and CSLL tax bases. All legal requirements must be met, and it is up to the Federal Revenue Service to oversee compliance.
This precedent establishes the possibility of rectifying past situations in which taxpayers followed the administrative guidance in effect at the time, with a potential impact on the review of tax assessments for recent years.
