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Brazil: Basis for calculating consolidated social contributions (PIS and COFINS)

Brazil: Consolidated social contributions

The rules for social contributions were consolidated in October 2019. This consolidation action, however, left open a question about how to calculate the basis on which the social contributions are applied—and in particular, the effect of a state-level sales tax on the social contribution base.


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Normative Instruction (Instrução Normativa (IN)) No. 1.1911/2019 consolidated the rules for the social contributions known as PIS and COFINS.* Read TaxNewsFlash

*PIS (programa de integração social) refers to an employees’ profit participation program and COFINS (contribuição para o financiamento da seguridade social) refers to a social contribution program for social security financing.

IN No. 1.1911/2010 repealed a prior normative instruction (IN No. 404/2004) and in particular its provision (Article 8, § 3, II) that ICMS* was to be included in the cost of the acquisition of goods and services for purpose of calculating the social contribution credits. This provision, however, was not reproduced in IN No. 1.911/2019 (refer to Article 167), thus giving rise to an interpretation from a decision of the Supreme Court (STF) in Special Appeal No. 574,706 / PR regarding the exclusion of ICMS from the PIS and COFINS calculation basis.

*ICMS—Imposto sobre Circulação de Mercadorias e Serviços—is a state-level sales tax imposed on the physical movement of merchandise.

Regarding the implications of the high court’s decision, Article 27 of IN No. 1.911/2019 considered the exclusion of ICMS from the social contribution calculation base. The amount excluded is the amount collected—not the amount shown on an invoice. If for the purpose of calculating credits, ICMS is not included in the cost of acquisition, then ICMS is to be excluded from basis of contributions actually collected.

Read a November 2019 report (Portuguese) prepared by the KPMG member firm in Brazil

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