Tax Area

Recently, the 3rd Panel of the Superior Chamber of the Administrative Council of Tax Appeals (“CARF”) allowed the use of PIS and COFINS credits on expenses with freight of finished products, as judged in proceedings No. 11080.005380/2007-27, although the court decision has not been published yet. 

In 2018, the STJ defined that, for PIS and Cofins crediting purposes, everything that is essential for the development of the company’s economic activity should be considered as input (Special Appeal No. 1.221.170 - Repetitive Topic No. 779). Therefore, the issue at hand is based on the concept of essentiality of freight as an input. 

Historically, until this judgment (August 2022), CARF had taken the position that transportation could not be deemed as an input, since it is not a sales transaction. However, the recent judgment adopted the understanding that freight is essential to the taxpayer’s activity, given that, if it were removed, it would not be possible to carry out the economic activity performed by the company. Thus, the freight costs of finished goods are essential to the company’s operations, fitting the criteria of essentiality and relevance defined by the STJ. 

Consequently, it can be inferred from this judgment that for freight to be considered an input (i) the transfer of the goods must correspond to an actual sales transaction; or, (ii) in cases where the product is not an actual sale, but rather a transfer of goods between establishments, the taxpayer must demonstrate that the freight services used by the company are necessary/essential to the final activity of selling the goods and providing services. 

This new position of the CARF is great news for taxpayers, as they will have favorable arguments in case there is a denial of requests for refund of PIS and Cofins credits on freight charges for finished goods.