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Since the judgment of Resp No. 1,221,170/PR, the STJ has brought new light to taxpayers regarding the concept of inputs for the purpose of using PIS and COFINS credits. The topic, which has been the subject of so many controversies, has finally gained a new chapter based on the definition presented by the Superior Court.
In terms of repetitive appeal, the STJ established an “intermediate” concept, according to which the inputs must be measured according to the criteria of relevance or essentiality, considering the indispensability or importance of a given item, good or service for the development of the economic activity carried out by the taxpayer.
Given the new scenario, taxpayers began to question which goods and services would be included in this broader concept. It was in this context that, among other questions, statements arose regarding the use of credits on expenses incurred with advertising, publicity and marketing.
In this regard, it is possible to verify that, after the judgment of Resp No. 1,221,170, the Administrative Council of Tax Appeals (“CARF”) has adopted a more flexible stance, in the sense of admitting that certain expenditures with advertising and publicity may be considered inputs. In some judgments, CARF has decided to recognize the possibility of crediting PIS and COFINS for advertising expenses, as long as they are directly linked to the business activity.
The first decision in this regard[1] was published on October 9, 2018, when CARF assessed, in addition to the criteria of essentiality and relevance, that the expense should be linked to taxed revenues. At the time, when the company in question was a provider of research, development, and innovation services for cosmetic and hygiene products, the right to discount credits was recognized since the revenues from such services are directly related to the expenses incurred with marketing, advertising, and publicity.
In another notable decision[2], published on September 6, 2019, CARF recognized the right of a card management company to discount PIS and COFINS credits due to its activity – even if secondary – related to the area of marketing and advertising. This is because the administrative body assessed that the marketing services provided by third parties to the company are essential inputs to its own provision of services, since they are fundamental for the development of the brand and recognition in the market.
In another high-profile case[3], CARF recognized the right of a retail store to discount credits arising from advertising and publicity expenses, when considering the Cooperative Advertising Fund (“VPC”) as input, taking into account that the company provides advertising services to promote the products, and such service provision is remunerated by the VPC.
Finally, it is worth noting that despite the favorable position, the existence of advertising and publicity expenses is not sufficient to ensure the taxpayer the possibility of discounts on PIS and COFINS credits. This is because, for them to be considered inputs, it is of utmost importance that there is a close connection with the business activity developed.
Therefore, it is recommended that a prior analysis be carried out on the feasibility of using such credits in light of the particularities of the transaction carried out by the taxpayer, and preventive judicialization of the matter should also be considered as a means of avoiding possible disallowances and tax assessments.
[1] Judgment No. 3401-005.291
[2] Judgment No. 3201-005.668
[3] Ruling No. 3302-008.120, published on 03.03.2020
