Brazil Court Approves Tax Credits for Freight Costs

Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.

By Ed Taylor

Brazilian companies battling to secure tax credits for their freight costs have posted their second consecutive court victory in less than two months.

On Feb. 22, an administrative appeals court of Brazil’s federal revenue service ruled in favor of the Brazil unit of world leading steel manufacturer ArcelorMittal, granting the company tax credits on its freight expenses.

The court ruled that the company’s costs in transporting finished products between separate units can be used as a credit for the 9.25 percent PIS and Cofins social security contribution taxes.

In 2002 and 2003, Brazil’s congress passed laws that eliminated the cumulative impact of the two taxes. Prior to these laws, the taxes were charged at every stop along a company’s production line but this was altered to make sure that the taxes were only paid at the final stop.

To guarantee this, companies were allowed to receive credits for the taxes on a list of inputs. Since then, companies have been attempting to expand this list and the freight question has generated major disputes with companies claiming credits and the tax department rejecting their claims.

In January, another of the revenue service’s appeals courts, known collectively as Carf, issued a ruling on this question in favor of Carglass Automotive, a joint venture between Belgium’s Belron and a Brazilian investment group, Advisia Investimentos.

Strengthening Position of Companies

Attorneys told Bloomberg BNA these back-to-back decisions have strengthened the position of companies. The revenue service has argued that credits for finished products could only be claimed if the products were shipped directly to purchasers as part of a sales operation.

In its ruling in favor of Carglass, the court stated that the determining factor was whether the freight costs were part of the production process and not if they were part of the final sales operation.

In the case of ArcelorMittal, the court also accepted the company’s position that the transportation of steel plates to distribution centers was part of the production process.

“The transfer between units is necessary for the business activity and is part of product operations,” ArcelorMittal attorney Tiago Conde of the law firm Sacha Calmon Misabel Derzi Advogados told Bloomberg BNA via e-mail Feb. 24.

To contact the reporter on this story: Ed Taylor in Rio de Janeiro at

To contact the editor responsible for this story: Penny Sukhraj at

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request International Tax