Originally published in the September 6 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil’s Federal Revenue Department (FRD) has ruled that corporate taxpayers under the noncumulative P.I.S. (Program for Social Integration contribution) and COFINS (Contribution for the Financing of Social Security) regime are entitled to take retroactive P.I.S. and COFINS tax credits that were not taken at the appropriate time.
Private Letter Ruling (PLR) No. 104/2007 is important because it is the first time the FRD had declared its official position on the subject, and the applicable statute does not address the issue. The letter ruling was issued by the FRD’s Superintendence for the 10th Fiscal Region, which has jurisdiction over the southern state of Rio Grande do Sul, and was published in the July 20 edition of the official gazette.
According to the PLR’s summary, the taxpayer had not taken P.I.S. and COFINS credits on the purchase of some spare parts and maintenance services destined for machinery and equipment directly allocated to the production of goods. The first part of the PLR recognizes that those items entitle the taxpayer to P.I.S. and COFINS credits as long as they are not added to the cost of the relevant machinery and equipment, and to the extent that other credit rules are followed.
The second part of PLR 104 says the term for the taxpayer to take those tax credits is five years from the date the spare parts are used in the relevant assets; as for maintenance services, the term also is five years, counted from the date the services have been applied to the asset.
One of the legal grounds used in PLR 104 is decree 20,910 of 1932, which provides for the general statute of limitation of five years for any debts owed by, and any credits or actions, of whatever nature, against any federal, state, or municipal government. The PLR also uses as a legal basis articles 3, paragraph 4, and 15 of Law No. 10,833/2003, which provides that unused P.I.S. and COFINS credits can be used in subsequent months. By combining the law and decree provisions, the FRD’s conclusion was that credits could be taken even at a later date as long as the general five-year statute of limitation is observed.
David Roberto R. Soares da Silva