After almost three years of debate, the 1st Section of the Superior Court of Justice (STJ) recognized the illegality of Normative Instructions 247/02 and 404/04 and adopted an intermediate position, according to which the criteria of essentiality and relevance should be reviewed for the purposes of deduction from the PIS and Cofins calculation basis.

Because it was established within the system of multiple appeals, this understanding should guide all courts and administrative bodies.

Recurring in the judicial and administrative tax area, the topic revolves around the concept of the input applicable for the purposes of crediting PIS and Cofins. During the trial, the following concepts were presented:

  1. the restrictive concept, which is close to what is established for IPI, with more rigorous criteria for expenses incurred to give rise to the right to a credit;
  2. the intermediate concept, in which a relationship exists between the good or service used as input and the activity carried out by the taxpayer; and
  3. the broad concept, which authorizes the deduction of all operating costs and expenses used in IRPJ legislation.


Justice Regina Costa, who drafted the majority opinion of the Court, understood that the instructions mentioned, by restricting the scope of the concept of expenses that could give rise to PIS and Cofins credits, offended the non-cumulative framework set forth in the Constitution and in Laws No. 10,637/02 and 10,833/03, in addition to violating the principle of taxpayer capacity.


In this sense, the Justice specified that, for the purposes of PIS and Cofins credits, the criteria of essentiality and relevance of the good or service of the company's business activity must be observed, whether or not they are consumed during the production process, that is, the intermediate concept.


Justices Og Fernandes, Benedito Gonçalves, and Sérgio Kukina followed the minority opinion, who understood that the aforementioned normative instructions were legal, as they established a restrictive concept for credit purposes very close to that used to calculate IPI credits (restrictive), since it references only raw materials, intermediate products, packaging materials, and other goods that undergo changes.


The rapporteur, Justice Napoleão Nunes, emphasized his personal understanding that the adequate understanding of the input covers all direct and indirect (broad) expenses of the taxpayer. Thus, according to him, the concept covers expenditures that refer to all inputs and it is not possible to separate what is essential from what is not. However, the reporting judge took the position of Justice Regina Costa.


In this case, the 1st Section, by a majority, partially granted relief to the taxpayer's appeal (a food company) so as to order the remand of the case to the lower court in order for it to review the items that fit within the concept of input set by the Court, in conjunction with the corporate purpose of the company and the evidence submitted with the application for mandamus.


It concludes that the definition of what is input will be carried out on a case-by-case basis, and the company's operation should be analyzed in the light of the criteria defined by the STJ.


The position adopted by the court is close to the understanding of the Tax Appeals Court (Carf) that the concept of input for PIS and Cofins credits differs from that defined in IPI legislation and the concept of deductibility of expenses for the IRPJ, as it is a separate and intermediate concept that must be reviewed in an individualized manner in specific cases.