Consolidation of rules to PIS and Cofins

On December 20, Brazilian tax authorities issued Normative Instruction #2,121/2022, establishing a new regulation that consolidates the rules applied to PIS and Cofins and revokes the then-current regulation (Normative Ruling #1,911/2019).

Among the main changes, we can mention the definition of the correct ICMS to be excluded from the PIS and Cofins calculation basis as the one informed in the tax invoice, in line with the decision issued by Brazilian Federal Supreme Court.

The new regulation also provided that the Tax on Manufacturing Products (“IPI”) and the ICMS due on a tax substitution regime (“ICMS-ST”) should not be included in the calculation basis for credits.

In addition, the concept of input used to offset credits was also updated. In this context, the regulation reinforces that although inputs are considered expenses arising from legal imposition, situations in which the requirement is due to the conclusion of contracts or collective agreements are excluded from these situations.

Besides, Normative Ruling #2,121/2022 also established that the additional 1% rate on Cofins due on importation will be in effect until 12.31.2023.

Key takeaway

We suggest that businesses assess the impacts of the new legislation on their operations, especially with regards to offsetting credits.