It is the Tax Authority (Fisco) that decides whether a tax must be charged, but if there is doubt as to whether a given transaction is taxable or not, the taxpayer should not be held liable. It was on this understanding that the 3rd Panel of the Federal Regional Court of the 3rd Region (TRF-3) denied the Union’s appeal and upheld a judgment that exempted an automobile manufacturer from paying PIS and Cofins on technology transfer contracts with its parent company.
This company says it sent royalties abroad, on account of technology transfer, technical collaboration, and technical services contracts. However, the Federal Revenue Service (Receita Federal) said the payments were made for the rendering of services and charged PIS/Cofins.
Outcome – The taxation was upheld by the Administrative Council of Tax Appeals (Carf), but cancelled at the first judicial instance. In judging the Union’s appeal, federal appellate judge Antonio Cedenho noted that the controversy lies in whether the manufacturer’s remittances abroad are royalties (non-taxable) or mixed contracts. In the latter case, Law 10,865/2004 would apply, which established the levy of PIS/Cofins in the case of services rendered in Brazil by someone residing outside the country.
The magistrate, however, pointed out that the type of the agreements was not proven. And “with doubt hanging over the nature of the contracts, the petitioner could not suffer the demand for the said credit,” stated Cedenho, emphasizing that the burden of proof lies with the Tax Authority. In this manner, he voted to reject the Union’s appeal and was followed by his colleagues on the 3rd Panel.
In the opinion of attorney Fabio Pallaretti Calcini, partner at Brasil Salomão e Matthes, the TRF-3’s decision is important, since the court recognized that PIS/Cofins import does not apply in the case of payment of royalties. And much less can the Tax Authority charge such taxes if it is not certain of the nature of the remittances.
(Source: Conjur
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