A recent decision issued by the CARF 2nd Panel of the 2nd Chamber of the First Section analyzed the taxation of ICMS benefits and, by unanimous voting, concluded for the dismissal of the Corporate Income Tax (IRPJ) and Social Contribution over Net Profit (CSLL) levied on incentive amounts in view of the tax benefit granted by the States of Ceará and Bahia, since they have investment funding nature.

The assessment drawn up by the Brazilian Revenue Service aimed at charging the ICMS amounts returned between the years of 2004 and 2006. The company, however, succeeded in demonstrating that the tax incentives were granted with the purposes of making economically feasible the setting up of factories in the countryside of the States of Ceará and Bahia, by means of local investments, creation of direct and indirect jobs, as well as increasing production.

On that occasion it was considered that the clear intention of the States was to foster the development of industrial activities in regions that presented economic shortfalls. It was an important precedent for corporate taxpayers, because it shows that the Administrative Court is favorable to such position.

(Panel Decision n. 1202-000.921. Available at: <http://carf.fazenda.gov.br/sincon/public/pages/ConsultarJurisprudencia/listaJurisprudenciaCarf.jsf>. Access in: Feb. 2013).