The government published in the Official Gazette of the Union Provisional Measure (MP) No. 1,227, establishing necessary compensatory measures in view of the imbalance caused by maintaining the policy of payroll tax relief for companies and municipalities until 2027. The tax relief regime should have ended in 2023, but was extended for another four years by the National Congress at the end of last year (Law No. 14,784/2023).
The continuation of the payroll tax relief policy will cost R$26.3 billion in 2024, of which R$15.8 billion will be for companies and R$10.5 billion will be for municipalities. The compensatory measures, now announced by the Ministry of Finance, provide instruments to combat this disharmony in public accounts and follow the policy of reducing distortions that affect states and municipalities, promoting tax justice.
Essential in the search for fiscal adjustment and the reorganization of federal finances, the new provisional measure aims to correct distortions in the tax system. The provisional measure attacks one of the main distortions: the one involving the non-cumulative system of PIS/Cofins [Social Integration Program/Contribution for the Financing of Social Security], according to the Ministry of Finance (MF), which authored the proposal.
The Ministry of Finance points out that the compensation rules announced on Tuesday represent a necessary factor in view of the payroll tax relief, but warns that the proposal does not involve the creation or increase of taxes and is in balance with the federal budget. It will also not result in losses for smaller taxpayers and the productive sector.
The MP anticipates some effects of Bill No. 15/2024, specifically the registration of tax benefits, so that the Union becomes aware of and provides transparency to the enjoyment of dozens of tax benefits.
Furthermore, it meets the demands of municipalities, allowing those that already monitor and issue ITR in their territories to also judge the resulting administrative processes, always following the interpretative guidelines of the Union.
Scenario
As the Ministry of Finance points out, the non-cumulative nature of PIS/Cofins should be an instrument for effective taxation, neutral in the production and consumption chains, in which each taxpayer, when paying the tax, deducts the amount incurred in previous transactions. In a healthy system, the accumulation of credits should be the exception, and reimbursement in cash, something absolutely rare.
However, over the years, legislative changes, in addition to the non-cumulative “base upon base” system of PIS/Cofins, have reversed this logic. Currently, the accumulation of credits has become the rule for certain taxpayers, and “negative taxation” is even common. This ends up being a kind of opaque subsidy, in which the company is not only “exempt”, but receives money from the tax authorities in the form of reimbursement for presumed credits, for example.
According to the Federal Revenue Service, under the current model, there are cases of companies that, in addition to failing to collect PIS/Cofins, also fail to collect IRPF and social contributions from their employees' salaries. In other words, the taxpayer (employee) is burdened, but the person responsible for collecting the tax (employer) appropriates the amount.
Adjustment
To reduce this distortion, the MP maintains the non-cumulative system of PIS/Cofins in its original conception: allowing compensation only in this system and with these same contributions, and not with other taxes.
The presumed credit — which is a “legal fiction” and does not correspond to the value actually collected in the production and consumption chain — cannot be reimbursed in cash. This will avoid “negative taxation” or “subsidy” for these companies.
This prohibition on the reimbursement of presumed credits is, strictly speaking, the rule currently in force. However, there are eight situations in which the law still allows for reimbursement in cash, which represented R$1.4 billion in reimbursement claims in 2023. These cases will now be corrected by the MP.
It is important to highlight that the MP does not extinguish any credit, not even those in these eight cases of presumed credit, nor does it prevent broad compensation within the scope of non-cumulativeness, with PIS/Cofins itself. In the case of credits in general (except presumed ones), the possibility of reimbursement in cash is also not extinguished.
The main points of the new MP
PIS/Cofins credits in general
They will only be offsettable under the non-cumulative system, without offsetting with other taxes or in a “cross” manner, except with PIS/Cofins debts themselves;
The possibility of reimbursement in cash remains, subject to prior analysis of the credit right.
Presumed PIS/Cofins credit
The most recent laws already prohibit cash reimbursement, preventing “negative taxation” or “financial subsidies” for the sectors covered;
The MP extends this compensation ban to the eight cases that remained and which represented R$20 billion claimed in 2023;
The possibility of compensation in the non-cumulative system does not change, that is, the right remains, as long as there is tax to be paid by the taxpayer.
Source: Brazilian Federal Revenue Service.
