Originally published in the September 14 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil’s highest federal administrative tax court, the Superior Chamber of Tax Appeals (Câmara Superior de Recursos Fiscais, or CSRF), in two recent decisions has ruled that the two welfare taxes, P.I.S. (Program for Social Integration contribution) and COFINS (Contribution for the Financing of Social Security), are subject to different statutes of limitations.
The decisions are controversial because while adopting a 10-year statute of limitation to COFINS, it limits the P.I.S. statute of limitation to five years, in an apparent contradiction, as both contributions are similar and often share the same legal basis. The CSRF’s decisions (CSRF/02-02.155 and CSRF/02-02.228) were delivered on January 23 and 24, 2006, respectively, but only published in the official gazette on July 12, 2007.
For COFINS (Decision No. CSRF/02-02.155), the CSRF decided that the statute of limitations is 10 years by virtue of article 45 of Law No. 8,212/91. This provision establishes a 10-year statute of limitation for social security taxes destined for social security, which, according to CSRF, would be the case for COFINS. Although the full text of the decision has not yet been released, it seems that CSRF stated that the constitutional basis for COFINS is article 195, item I, of the Federal Constitution. That article provides that the social security will be financed by social contributions levied on corporate profits, gross income, and payroll; and COFINS basic statute (Complementary Law No. 70/91) expressly refers to that article as its constitutional basis.
As for P.I.S. (Decision No. CSRF/02-02.228), the CSRF ruled that the applicable statute of limitations is five years, according to article 150, paragraph 4 of the National Tax Code. This means the CSRF did not consider P.I.S. as a social contribution destined for social security based on article 195, item I of the Constitution. The reason behind that conclusion lies in article 239 of the Constitution, under the General Constitutional Provisions (rather than in article 195 of the Constitution, under the Social Security chapter) and provides that P.I.S. tax revenues will be destined to fund the Unemployment Insurance.
Due to its express constitutional destination (unrelated to social security), P.I.S. has been excluded by CSRF as a contribution to social security entitled to a 10-year statute of limitations, and thus should follow the statute of limitations generally applicable to other taxes.
Therefore, while tax authorities have 10 years to audit and assess COFINS, for P.I.S. the term is 5 years, according to the decisions above. The Federal Revenue Department has always adopted the 10-year statute of limitations for both P.I.S. and COFINS. The decisions, however, are not binding, but they can be used as an important precedent in case of tax assessments, especially for P.I.S.
It is important to note that the CSRF’s decisions were delivered before the recent Superior Court of Justice’s decision, which on August 15 ruled article 45 of Law No. 8,212/91 unconstitutional. Nevertheless, administratively, it is easier to have an administrative precedent (like the CSRF’s decisions) accepted than a judicial one.
David Roberto R. Soares da Silva