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Published Provisional Measure Limits PIS/Cofins Credit Offset and Introduces New Fiscal Rules

The Provisional Measure No. 1,227/24 has been published, introducing a series of changes in the national tax and fiscal sphere. The measure aims to bring greater fiscal balance, compensating for revenue losses with the continuation of payroll tax relief for 17 sectors of the economy and municipalities until 2025.

The Provisional Measure requires all legal entities using tax benefits to inform the Federal Revenue Service (Receita Federal do Brasil – “RFB”) through a declaration, detailing the qualification and value of the benefits received. The RFB will publish the types of benefits covered, deadlines, and conditions for submitting this information.

To qualify for the use of tax benefits, the measure imposes requirements such as regular payment of federal taxes, compliance with Cadin and FGTS, absence of sanctions for acts of administrative improbity or temporary interdictions, adherence to the Electronic Tax Domicile, and regular registration with the RFB. Failure to meet these requirements or delays in providing information will result in fines proportional to the company’s gross revenue, capped at 30% of the value of the tax benefits.

One of the main changes brought by the measure concerns the non-cumulativity of PIS/Cofins, which has significant implications for tax collection and fiscal administration in the country.

The non-cumulativity of PIS/Cofins was designed to allow neutral taxation throughout production and consumption chains. In this system, each taxpayer can deduct the tax paid at previous stages of production.

However, according to the Ministry of Economy’s justification for publishing the measure, legislative changes over the years have distorted this principle, leading to frequent credit accumulation for some taxpayers and a practice known as “negative taxation.”

To correct these distortions, Provisional Measure No. 1,227/24 reaffirms the original form of non-cumulativity of PIS/Cofins, allowing for offset only within the PIS/Cofins system and not with other taxes, such as IRPF. Therefore, the measure maintains the existence of these credits but limits the possibility of reimbursement by the Federal Revenue Service.

PIS/Cofins Credits in General:
  • They will only be compensable within the non-cumulative system, with no possibility of cross-compensation with other taxes, except for PIS/Cofins debts.
  • The possibility of cash reimbursement remains, subject to prior analysis of the credit right.

Presumed PIS/Cofins Credit:
  • Recent laws already prohibit cash reimbursement to avoid “negative taxation” or “financial subsidy” for covered sectors. The measure extends this prohibition to the remaining eight cases, which totaled R$20 billion in reimbursement claims in 2023.
  • The possibility of offset within the non-cumulative system remains, provided there is tax to be paid by the taxpayer.
  • The possibility of cash reimbursement is prohibited.
Finally, Provisional Measure No. 1,227/24 delegates the oversight and collection of administrative processes related to the Rural Territorial Tax (ITR) to agreements between the Union, the Federal District, and municipalities, provided they follow the norms established by the RFB, preserving its secondary competence.
The tax team at Gasparini, Nogueira de Lima, Barbosa e Freire Advogados is available to clarify any questions on the subject.