Bloomberg BNA’s Premier International Tax Library is a comprehensive global tax resource. Trust Bloomberg BNA's Premier International Tax Library for the guidance you need on...
By Ed Taylor
Oct. 26 — Companies, especially those with long production and delivery cycles, won a supreme court victory in their decade-long battle over Brazilian state value-added tax.
Brazil’s supreme court Oct. 24 ruled that states must return excess tax collected when companies prove their products sold for less than prices the state estimated in setting the VAT (ICMS).
The decision goes further than the court’s previous position that permitted reimbursements only when sales weren’t completed. The court stated that its ruling is binding and applies to the 1,300 lawsuits now before lower courts on this question.
Brazilian states set ICMS taxes for selected sectors on estimated profit margins at the final point of sale set by states rather than having the VAT charged on real prices at every stop along the product chain. The states charge companies VAT on these estimates at the point of manufacture before the final sale price is known leading to complaints that the state sales estimates are unrealistically high and lead to inflated taxes.
The ruling primarily affects sectors with long production and delivery chains such as the auto industry, pharmaceutical and beverage manufacturers, sectors dominated by multinational firms in Brazil. At present only two of Brazil’s 27 states permit the reimbursement of ICMS taxes paid in excess by companies.
“It is difficult for the estimated value to be close to the real value so that in practically all of the operations there will have to be some type of settling of accounts,” Sergio Villanova Vasconcelos of the law firm Peixoto & Cury Advogados told Bloomberg BNA Oct. 26. “We are going to have to see how the state tax officials react to this decision and how they adjust state legislation to the new rules.”
Attorney Douglas Mota of the firm Demarest told Bloomberg BNA Oct. 26 that the decision means “a lot of funds are going to have to be returned,” which he predicted could reduce state tax revenues.
To contact the reporter on this story: Ed Taylor in Rio de Janeiro at firstname.lastname@example.org
To contact the editor responsible for this story: Rita McWilliams at email@example.com
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)