Restrictions on offsetting tax credits impact agribusiness

Provisional Measure 1.227/2024, published yesterday, brought significant changes to the offset of PIS/Cofins credits with other federal taxes. The new rules impose additional restrictions, establish new requirements for the enjoyment of tax benefits and revoke certain possibilities for reimbursement and offset of presumed credits.

One of the main changes introduced by the provisional measure is the prohibition of offsetting PIS/Cofins credits with debts from other federal taxes, including social security taxes. From June 4, 2024, PIS and Cofins credits can only be used to offset debts from PIS and Cofins contributions themselves.

Furthermore, the credit balance of PIS and Cofins can no longer be reimbursed in cash, except for credits arising from transactions exempted by immunity, suspension, exemption and zero rate, which continue to be subject to reimbursement. This restriction can result in a significant negative impact on the cash flow of companies, especially those that accumulate presumed credits in sectors such as food, pharmaceuticals and petrochemicals.

Several entities spoke out against the new rules. The Brazilian Agribusiness Association (ABAG), for example: "MP 1.227 goes against the grain of Brazilian socioeconomic growth, as it further burdens companies and significantly reduces the competitiveness of important sectors, such as agribusiness. The measures, as they have a confiscatory profile, are a setback, strongly impacting companies' financial resources, increasing costs and reducing the profitability of the entire agricultural chain, which is fundamental to guaranteeing food security across the planet, in addition to contributing to social and economic situation of the country and for the surplus of our trade balance”.

The Brazilian Association of Vegetable Oil Industries (Abiove) pointed out that the "accumulation of PIS and COFINS credits discourages investments in the industrialization of oilseeds. These processes add 40% more value than the production of raw materials. That is, if The fewer investments in industrialization occur, the lower the added value of Brazilian soybeans will be. The MP, therefore, has the power to destroy value in the soybean chain. soy and derivatives (base 2023) is R$6,5 billion. ⁠This amount, with the MP, becomes a cost for the vegetable oil industry. This cost will be considered in the pricing of soy, representing a 4% reduction. of the price paid to rural producers. That is, the soybean producer will be harmed by the cumulative activity in the oilseed industry. This impact can reach up to 5% of the current value of soybeans".

In turn, Aprosoja Brasil reported that “in an initial analysis, the industry in the soy production chain, which processes and exports grains, bran and oil, indicated that credits in the order of R$6,5 billion would no longer be received. As the market does not export taxes, the rural producer will lose this income in the acquisition contracts. The calculated direct consequence will be 4% to 5% in the price of a bag of soybeans sold, deeply harming soybean and corn producers”.

One of the most contested changes was the inclusion of item XI in paragraph 3 of article 74 of Law 9.430/1996. Your writing:

Art. 74. The taxpayer who establishes a credit, including legal claims with final and unappealable judgment, relating to a tax or contribution administered by the Federal Revenue Secretariat, subject to refund or reimbursement, may use it to offset his own debts relating to any taxes and contributions administered by that Body.

§ 1 The compensation referred to in the caput will be carried out upon delivery, by the taxpayer, of a declaration containing information relating to the credits used and the respective debts offset. [...]

§ 3 In addition to the hypotheses provided for in the specific laws of each tax or contribution, they cannot be subject to compensation upon delivery, by the taxpayer, of the declaration referred to in § 1: [...]

XI - the credit of the non -cumulative incidence regime of the contribution to PIS/PASEP and COFINS, except with debt of these contributions, from June 4, 2024. (Included by Provisional Measure No. 1.227, of June 4, 2024)

It is important to emphasize that the provisional measures, although effective immediately, depend on approval by the National Congress to be converted into law. If they are not approved within the constitutional period of 60 days, extendable for an equal period, they will lose their effectiveness.

The full text of Provisional Measure 1.227/2024 can be read at the link below.