Challenge and innovation were words that certainly represented the year 2022 for the Administrative Council of Tax Appeals (Carf). The first months of the year were marked by stoppage of the judgment sessions due to the adherence of part of the board members of the body to the tax auditors' strike. Without the minimum quorum of board members for judgments, the sessions had to be suspended.

Also in the first half of the year, a relevant and unexpected change: the appointment of board member Carlos Henrique de Oliveira to the chairmanship of Carf, replacing board member Adriana Rêgo, who presided over the body during the entire period after Operation Zelotes.

At the beginning of the second half of the year, the tax auditors reached an agreement on extension of the strike and the body's judgment sessions finally resumed. At first, only the Superior Chamber of Tax Appeals (CSRF) resumed its judicial activities (with the new chairman already in charge), but was soon followed by the ordinary panels.

In September, there was an innovation: for the first time in its history, Carf held a session in person outside Brasília. The change was the result of implementation of a measure announced by Chairman Carlos Henrique de Oliveira at the very beginning of his term. The CSRF sessions were held in São Paulo, thus bringing the judgments closer to the taxpayers.

The year 2022 was also marked by innovation in important tax issues, as well as major reversals in the most consolidated case law. Whether by the change in the composition of the CSRF panels or the new tie-breaking criteria in favor of taxpayers, important topics had new debates, which often resulted in new results.

In the trilogy of articles that we will continue in the coming weeks, the main topics of each of the three panels of the Carf's Superior Chamber of Tax Appeals will be addressed. In this first article of the trilogy, we take a look back at judgments by the 1st Panel of the CSRF.

Judgments by the 1st Panel of the CSRF in 2022

In the 1st Panel of the Superior Chamber of Tax Appeals, responsible for deciding cases involving the IRPJ and CSLL, changes in the composition of the panel caused changes in the body's historical understanding.

A big highlight was the changes in the discussions related to the amortization of goodwill on equity acquisitions. The 1st Panel ruled out application of a qualified fine in transactions with goodwill with a "vehicle" company (appellate decision 9101-006.292) and with internal goodwill (appellate decision 9101-006.153). In an absolutely innovative manner, it recognized the possibility of deducting intra-group generated goodwill expenses (appellate decision 9101-006.373) from the IRPJ and CSLL calculation basis.

Specifically with regard to the deductibility of goodwill expenses from the CSLL tax basis, until the beginning of 2022, decisions were favorable to taxpayers, applying a criterion different from the IRPJ (appellate decision 9101-005.894). With the change of the board, the issue became unfavorable to taxpayers in July of 2022 (appellate decision 9101-006.164). This understanding was maintained in the remaining sessions of the year.

The board also recognized the possibility of deducting amounts paid to officers and directors and managers as profit sharing (appellate decision 9101-006.372) from the IRPJ and CSLL calculation basis.

Regarding transfer pricing, the panel decided finding for the possibility of presenting, during tax audits, a new calculation for the purpose of obtaining the parameter price (appellate decision 9101-006.312) and for application of the FOB clause (free on board) for the calculation of the price charged (appellate decision 9101-005.979).

With respect to the issue of profits earned abroad, the case law remained stable throughout the year: the 1st Panel ruled out taxation of profits from foreign subsidiaries and affiliates under MP 2158-35/01 by application of clause 7 of the Treaties (appellate decision 9101-006.247).

The concomitant requirement of a separate fine on the estimated income tax and an ex-officio fine of 75% on the amount not collected at the end of the calendar year has been the subject of much debate: in precedents in 2021, the body had been deciding for setting aside one of the penalties (appellate decision 9101-005.986).

At the July 2022 session, in a majority decision, the panel confirmed the possibility of concurrent application of the penalties (appellate decision 9101-006.172). In the September session, the board members resumed the understanding that concomitance is impossible, by applying the article 19-E of Law 10,522/02 (appellate decision 9101-006.284).

In 2023, the debates are expected to be renewed due to the change in the composition of the board: at least nine board members of the Superior Chamber of Tax Appeals are expected to leave the body at the end of their terms. The beginning of the year already had a new nomination for the chairmanship of the body, tax auditor Carlos Higino Ribeiro Alencar.

Regardless of the changes in composition, what is expected is continuity in the formation of a fair and open case law, with a guarantee of the adversarial process and full defense. Much more than a simple review of the administrative assessment, Carf, and especially the panels that make up the Superior Chamber of Tax Appeals, perform the noble and essential function of consolidating the Federal Administration's interpretation of tax legislation. In a country with such a complex tangle of regulations, this will never be a small task.