Federal Government presents Tax Reform bill that unifies PIS and COFINS at a 12% rate

By Andreia Moraes Silva



Long awaited, the tax reform bill presented by the Federal Government only unifies PIS and COFINS and causes a nominal tax rate increase, which would become 12% (even though the Government denies any tax burden increase).

The Government’s justification for such a shy “tax reform” is to promote the reform in steps and to promise to submit new bills dealing with the IRPJ – Corporate Income Tax – and IRPF – Individual Income Tax – (reducing corporate taxation and recriating dividend taxation), IPI – Excise Tax on Manufactured Products – (simplifying and aligning it with the selectivity principle) and the payroll de-onneration (aiming to reduce the cost of formal labor).

Under this standpoint, Bill 3387/2020, presented yesterday (07/21), would be just the first step of the reform. It creates the Social Contribution upon Transactions with Goods and Services (CBS), which, if approved, shall replace the PIS and COFINS contributions and shall be levied upon an entity's the gross revenue and increments, such as fines and burdens, arising from internal and import transactions. The main points of the bill are summarized below:

a) The CBS calculation base does not include: ICMS (State Sales Tax), ISS (Local Service Tax), the CBS itself, and unconditional discounts;

b) Are taxpayers of the CBS: legal entities and individuals equalled to legal entities by the IRPJ legislation;

c) Are not taxpayers of the CBS: residential condominiums, philanthropic institutions and foundations, class-representation entities, committees of professional inspection, autonomous social services, temples of whichever religion, unions, and political parties;

d) Digital platforms shall be responsible for collecting the CBS levied on transactions performed through them, if the seller doesn’t register the transaction through issuance of a fiscal invoice;

e) Right to credit the amount of CBS indicated in the fiscal document of acquisition (levy upon the value added);

f) Maintenance of tax immunity for charitable organizations of social assistance and of tax exemption for temples of whatever religion, political parties – including their foundations –, local, regional and federal unions and residential condominiums. Remain exempt the revenues arising from healthcare services paid by SUS (Unified Health System), sales of basic food products, municipal public transportation services, sale of residential real estate to individuals (general rule subject to exceptions), acts between cooperatives and their members, among others;

g) The Manaus Free Trade Zone tax benefits are maintained;

h) Maintenance of single-phase levy for a few products, such as gasolines, diesel oil, natural gas, aviation kerosene, biodiesel, and cigarettes;

i) There is no change for businesses under the Simples Nacional. The entity that acquires goods and services businesses under the Simples shall be able to accrue CBS credit;

j) Financial institutions shall continue to benefit from the current accrue system (5.8% rate);

k) Levy upon import of goods and services, including assignment and licensing of rights, including intangibles;

l) In an import transacion, are exempted: shipments without commercial value or orders placed by individuals, travelers' luggage, raw materials for scientific research, machines and equipment, imports to the Manaus Free Trade Zone, among others;

m) Possibility to offset PIS and COFINS credits with whichever taxes or reimbursement, in the cases already established by law;

n) Enforcement of the CBS within 6 (six) months as of the new law’s publication.

O Governo afirma que a CBS proposta representa um modelo novo de incidência das contribuições, com tributação uniforme de bens e serviços, simplificação para as empresas e transparência para o consumidor. Outro ponto favorável da CBS para o Governo é que sua criação encerraria as duas maiores fontes de litígios envolvendo o PIS e a COFINS: (1) dúvidas sobre o conceito de insumo para fins de créditamento dessas contribuições por industriais e prestadores de serviços e (2) exclusão do ISS e do ICMS da base de cálculo dessas contribuições. A ideia exposta pelo Governo Federal é que o PL 3887/2020 seja acoplado à PEC 45 ou à PEC 110, ambas propostas de emendas constitucionais que já tramitam no Congresso e que serão analisadas pela Comissão mista da Câmara e do Senado Federal.

The Government sustains that the proposed CBS represents a new model of contribution levy, with uniform taxation of goods and services, simplification for businesses, and transparency to the consumer. Another favorable point of the CBS to the Government is that its creation would end the two main sources of litigation involving PIS and COFINS: (1) questions involving the concept of inputs for purposes of credit accrual of these contributions by manufacturers and service providers, and (2) the exclusion of ISS and ICMS from the calculation basis of these contributions. The Government’s idea is to attach Bill 3887/2020 to either PEC 45 or PEC 110, both propositions to amend the constitution which are already in Congress and shall be analyzed by a Mixed Committe of the House of Representatives and the Senate.





Author


Andreia Moraes

Partner

Post-Graduate Student in Business Administration (MBA) from Fundação Getúlio Vargas. See the perfile here.

Read other articles in the area Tax.