The Administrative Board of Tax Appeals (Conselho Administrativo de Recursos Fiscais - CARF) judged a tax assessment involving the Merril Lynch Bank, having as the central issue the charging of the IRPJ and CSLL over payments made as Profit and Result Sharing (Participação nos Lucros e Resultados - PLR), supposedly non-deductible. The Tax Authority argued, in summary, that those expenses are not essential to develop the business activity and that, additionally, the distribution of those amounts would not have respected the rules provided in Law n. 10.101/2000, for which reasons those amounts would not be deductible for the purposes of calculating the payable IRPJ and CSLL.

In his vote, reviewer Antônio José Praga de Souza decided for the deductibility of those amounts, on the grounds that, though the PLR is not an essential expense, it is a management mechanism that, as a rule, brings significant results to the company and, with this, increases its profits and, consequently, the basis for calculation of the IRPJ and CSLL. Moreover, as argued in the vote, the requirements provided in Law n. 10.101/2000 are related to the taxation of the social security contribution, not affecting, as a consequence, the deductibility of the tax assessments.

(Panel Decision n. 1402-001.135. Available at: <>. Access in: Jan. 2013).