By Guilherme Martins and João Pedro Riccioppo Cerqueira Gimenes, with the
collaboration of Pedro Antonio GM Buzas

On June 20, 2023, the 1st Panel of the Superior Court of Justice (“STJ”) ruled in favor of taxpayers when deciding that accumulated payments of interest on equity (“JCP”) can be deducted from the calculation basis for Corporate Income Tax and CSLL retroactively, that is, even in relation to previous fiscal years.

The ruling represents an important victory, since the 2nd Chamber, which also deals with issues concerning Public Law within the STJ, already has a favorable understanding for taxpayers on the subject. Therefore, with the decisions in both chambers, the National Treasury will not be able to appeal to the 1st Section (which standardizes the understanding of public law collegiate bodies).

The discussion was presented to the 1st Panel through the Internal Appeal in Special Appeal No. 1,971,537/SP, in which the National Treasury positioned itself against the possibility of retroactive deduction, which occurs when companies make payments relating to past years, calculating the amounts to be deducted from IRPJ and CSLL after the respective calendar year.

Thus, the debate observed the existence of a time limit for the application of the benefit, which, from the perspective of the National Treasury, was not settled in case law.

However, the rapporteur of the case, Minister Gurgel de Faria, cast a vote contrary to that alleged by the Treasury, in the sense that the STJ jurisprudence is aligned with regard to the possibility of retroactivity, an understanding unanimously followed by the judging Panel: “Both panels are voting in the sense that from 1997 [when the legislative change occurred] the deduction of interest on equity, even in relation to fiscal years prior to that in which the legal entity's profit was realized, is possible”, said the rapporteur.

Now, with crystal clear decisions from both Panels, the STJ has ratified and consolidated its understanding on the matter. The National Treasury must wait for the publication of the decision to analyze the possibility of appealing. However, given the merely temporal aspect of the rule, our tax team understands that the discussion has infra-constitutional contours, which could hinder the eventual assessment of the matter by the STF.

Our team is available to provide any clarifications on the subject.