Brazilian supreme court rules on the exclusion of state VAT from PIS/COFINS

Brazilian Supreme Court (STF) has recently decided for the unconstitutionality of considering theState VAT (ICMS)in the tax base of contributions PIS and COFINS.

The tax base to calculate such contributions is the companies’ turnover, or gross revenue. In the Supreme Court’s ruling on RE (extraordinary appeal)n. 574.706 it was acknowledged that State VAT (ICMS) should be deducted from the gross revenue before the calculation ofsuch contributionsonce theState VAT (ICMS) considered in the price is a revenueof the State and, therefore, does not belong to the tax payer.

Provided this recent decision, that still awaits res judicata, companies interested in recovering overpaid PIS/COFINS contributions and, also, avoiding future incorrect collection, must file the competent action before Brazilian local courts.