A Federal Judge in the Federal Regional Court for the First Region (TRF- 1ª Região) in Brasilia issued an order by request of a company headquartered in the State of Minas Gerais, allowing it not to include a state tax (ICMS) on the tax basis of two federal taxes, namely COFINS and PIS. The merits of the case shall be addressed by the other members of the same group of federal judges in the Court.

As informed by the TRF-1 press section, the company (in the textile business) filed a suit requesting a preliminary decision in order to avoid paying COFINS and PIS taxes on the amounts of the State tax. The  trial judge denied the request, thereby motivating a recourse to the Federal Court, where its plea was then granted.

The Court judge, Maria do Carmo Cardoso, who granted the order, stated that the case demanded an urgent decision in view of the fact that the operational activities of the company would be impaired if it had to go on paying the federal taxes as they have been assessed. The order would, in addition, prevent the company from being submitted to the legal penalties.

A similar case is pending in the Supreme Court in Brasilia, on the grounds that the inclusion of the State tax (ICMS) on the tax basis of PIS and COFINS is a violation of Article 195, I of the Brazilian Constitution. These two federal taxes would have constitutional permission to charge solely the amount of the sales of merchandise and services invoiced by the taxpayer, but not a tax value which represents a State revenue.

The Court decision favors solely the party seeking for Court relief. Any other company interested in pursuing the same rights would have to file its own suit. Claiming tax credits for the past five years is also advisable and a legal right for any taxpayer submitted to illegal or unconstitutional tax levies.

The precedent is the “Agravo de Instrumento 2007.01.00.000928-4”