Since 2004 the financial income of companies was subject to PIS and COFINS social contribution at a zero rate.
Decree no. 8426/2015 published on 4/2/2015 changed the rates of such contributions levied on financial income, including income derived from transactions for hedging purposes, earned by legal entities subject to the non-cumulative regime for assessment of such contributions.
The PIS rate increased to 0.65% and the COFINS rate to 4%, and such increases will come into effect on 7/1/2015.
Subsequently, Decree no. 8451/2015 published on 5/20/2015 reduced again the rates of these contributions on financial income derived from foreign exchange variation (revenues and losses), as well as on hedging transactions, to zero.
However, PIS and COFINS levy (at 0.65% and 4% respectively) on other types of financial income, such as income derived from financial investments, remained in effect.
In our opinion, this is an undue levy and the companies subject to the non-cumulative taxation regime may challenge it in court. The legal arguments already discussed include the argument that PIS and COFINS levy cannot be imposed by a Decree of the Executive Branch, but only by enactment of law.
Moreover, the violation of the principle of non-cumulativeness of those contributions is also questionable as the regulation does not provide for the right to record the credit related to financial expenses of the companies.
Lastly, the unconstitutionality of the Decree is another argument, as such contributions could only be levied in a differentiated manner considering the economic activities of the companies, and not a certain type of income.
We remain at your service to provide other clarifications on the subject, as well as to make a feasibility analysis of the respective litigation.
Marcelo Salles Annunziata
+55 11 3356-2187
Luis Augusto Gomes
+55 11 3356-2054