EXCLUSION OF VAT ON THE BASIS CALCULATION OF “PIS” AND “COFINS” (REVENUE TAXES) OVER IMPORTATION – POSSIBLE REFLECTIONS ON INTERNAL OPERATIONS

EXCLUSION OF VAT ON THE BASIS CALCULATION  OF “PIS” AND “COFINS” (REVENUE TAXES) OVER IMPORTATION – POSSIBLE REFLECTIONS ON INTERNAL OPERATIONS

Last Wednesday (March 20th) Brazil Supreme Court (“STF”), judged not constitutional the inclusion of VAT on the PIS and COFINS basis calculation for the purpose of importation operations.

By the legal understanding of the Ministers, the Law number 10.865/04, which deals with VAT inclusion on the PIS and COFINS tax basis calculation, are not in compliance with the Brazilian Federal Constitution, as the VAT is not part of the cost structure which composes the “custom value”, according to the concept set on the Constitution (Article 149, § 2º, III, “a”) used as parameter.

The Federal Government is concerned that this decision strengths the taxpayers argument regarding the exclusion of VAT basis calculation of these contributions on the internal operations.