Historically, CARF used to accept the deduction of JCP paid taking into account the net equity accounts of previous years. Previous precedents understood that there was no legal provision that conditioned the deduction of JCP to its calculation, payment and deduction in the same year. These decisions stated that there would only be a limit related to the amount of JCP to be deducted (that is, 50% of one of the following amounts: (i) net profit, before income tax provision and before the deduction of the interest itself, of the year the interest would be paid or credited, or (ii) balance of accumulated profit of previous years).
Despite this favorable scenario, as of 2008, some CARF decisions followed tax agents’ positions to the effect that the legislation would not allow the deduction of JCP calculated on net equity accounts of previous years. The main argument mentioned by these precedents is that IRS Normative Ruling determined that the payment and deduction of JCP should be made under the accrual basis.
Recently, Decision n. 1402-001,178 has returned to the previous favorable understanding on the matter, which may indicate a trend to consolidate a position favorable to taxpayers. In this specific precedent, resulting from a unanimous decision by the 4th Chamber, 2nd Ordinary Panel of the 1st Section, Reporting member Antonio Praga stated that the accrual basis does not disallow the payment and deduction of JCP on net equity accounts of previous years. Instead, it only requires that, for deduction purposes, the expense is registered when the payment of the JCP is to take place, that is, when the company becomes a debtor and the shareholder is entitled to request the payment of the corresponding amount after the company decides to make the payment. Thus, the period when the JCP expense must be registered under the accrual basis is the one when the payment is decided.
Since this decision was rendered by one of the Chambers of the 1st Section, one cannot consider that there has been a consolidation of CARF’s understanding on the matter. However, this is an important precedent to confirm taxpayers’ arguments. This precedent is also aligned with the analysis made by the 1st Panel of the 1st Section of STJ upon judgment of Special Appeal n. 1,086,752/PR.
(Decision n 1402-001,178).
<http://carf.fazenda.gov.br/sincon/public/pages/ConsultarJurisprudencia/listaJurisprudenciaCarf.jsf>. Accessed in: April, 2013).