Tax Newsletter: No levy of PIS/COFINS on stock exchange demutualization

06th December, 2021

In a decision rendered by the 1st Panel of the 2nd Chamber of the 3rd Section, CARF Councilors determined that PIS and Cofins taxes should not be levied on the sale of shares held during the demutualization period of the stock exchange. According to the Panel, these shares do not constitute revenue and, therefore, should not be part of the tax base of the contributions.

On the other hand, the RFB (“Receita Federal”, the Brazilian IRS) understands that the sale of these shares during the stock exchange demutualization period does constitute revenue. This is because, according to the RFB, the shares must be classified as current assets, and therefore should be included in the tax base of PIS and Cofins.

It is in this sense that the Rapporteur of the case, Councilor Hélcio Lafetá Reis, stands. For him, the shares constitute income and, for this reason, must be considered as current assets, and must therefore be subject to PIS and Cofins, as provided for in the tax legislation.

On the other hand, counselor Pedro Rinaldi de Oliveira Lima defends that the shares acquired prior to the demutualization – which arise from a context in which the financial entities Bovespa and BM&F were non-profit institutions, and not publicly-held legal entities – should not be conceived as hypothesis for levying contributions, since, in these cases, it is not a matter of revenue, but of a mere entry.

This was the opinion of the panel that ruled in two different cases, Judgments Nos. 3201-009.278 and 3201-009.230. However, this understanding is not conclusive yet. In another decision handed down by the same panel, corresponding to judgment no. 3201-002.517, the Councilors took a different position, upholding the collection of the contributions and holding that the sales of stocks, under these circumstances, would constitute operating income, on the grounds that the main object of the taxpayer’s business activity would be, precisely, the trading of stocks.

The matter is not yet settled, but the judgments handed down so far are at least able to provide taxpayers with a little clearer guidance as to whether these amounts should be taxed or not, depending on the context in which the corresponding transaction was carried out.

With nothing further to add at this time, we remain at your disposal for any clarifications that may become necessary.

*This newsletter had the cooperation of Julia Branco Peres Dib  and partner Carlos Crosara.

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