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Brazilian Federal Supreme Court Holds Inclusion of ICMS in CPRB Basis is Constitutional — Orbitax Tax News & Alerts

The Plenary of the Brazilian Federal Supreme Court came to a decision on 23 February 2021 that the inclusion of the state value added tax (ICMS) in the basis for calculating the social contributions on gross income (CPRB) is constitutional. This is counter to an earlier decision that the inclusion of ICMS in the calculation base of the contribution to the social integration program (PIS) and the contribution for the financing of social security (COFINS) is unconstitutional. This prior decision was used as the basis for the argument that the inclusion of ICMS for calculating CPRB should also be unconstitutional. However, the release from the Federal Supreme Court on its decision explains that if ICMS was not included in the calculation basis of CPRB, this would greatly increase the tax benefit of the optional CPRB regime, which would be in violation of article 155, paragraph 6, of the Constitution. As such, the inclusion of ICMS cannot be considered unconstitutional.