In a recent decision, the 1st Panel of 4th Chamber of 1st Judgment Section of the Federal Administrative Tax Court recognized the possibility to deduct in the computation of the Real Profit payments concerning retroactive Interest on Net Equity. This infraction notice was issued against Citibank Leasing S/A – Arrendamento Mercantil, which allegedly deducted from the computation of Real Profit the interests paid in calendar years 2002, 2003, 2004, 2005 and 2006, due to the lack of corporate deliberation in due time and violating the accrual accounting basis, according to which this interest is only deductible in the same year it is assessed.
The taxpayer argued that the payment of Interest on Net Equity concerning all years until 2006 was approved during a Special Meeting and that, besides all requirements for the deduction being duly complied with, there is no legal provision forbidding the deduction of retroactive Interest.
As sustained by the taxpayer, the Administrative Court recognized that it is possible to pay and deduct Interest on Net Equity concerning previous years, so the shareholders present in a Meeting can, at any time, deliberate of this type of capital remuneration, if the deduction requirements and limits provided by Income Tax rules are duly complied with. Furthermore, the legislation does not have any provision on the adequate moment to deliberate the payment of Interest on Net Equity. Therefore, the accrual basis period is the one in which shareholders make this deliberation, and it is not necessary to rectify financial statements from previous periods to perform payment of retroactive Interest on Net Equity.
(Decision No. 1401-000.901. Available at: http://carf.fazenda.gov.br/sincon/public/pages/ConsultarJurisprudencia/listaJurisprudenciaCarf.jsf. Accessed in June 2013).