Recovery of tax credit: attention to the opportunities to keep the business competitive

EXPERT OPINION

Recovery of tax credit: attention to the opportunities to keep the business competitive


Different types of credits can be recovered, positively affecting the company's financial health

By Cristiano Gonçalves


Part of strategic business management is the permanent search for resources that contribute to maintaining profitability and competitiveness. As one of the actions in this regard, the Company’s Management should be attentive to the recovery of tax credits.

In situations where taxpayers unduly pays or overpays taxes or has other types of amounts to be recovered, they are entitled to recover such amounts through offsetting, refund, or reimbursement processes with the Federal Revenue.

The agency's most recent revenue report shows that, in 2020, tax offsetting moved around BRL 167.7 billion, an increase of 58% compared to 2019.

Analysis of the period | January - December 2020

DEBTS OFFESET BY CREDIT TYPE | JANUARY TO DECEMBER / 2020 AND 2019

Credit Type Total Debt Amount (BRL) Increase / Decrease (BRL) %
2020 2019
Lawsuit 63,620,222,788 23,216,831,685 40,403,391,103.12 174%
Negative Balances 42,395,337,187 32,340,379,822 10,054,957,365.87 31%
Non-cumulative PIS/Cofins 29,811,657,125 27,376,949,689 2,434,707,436.19 9%
Undully Payment or Overpayment 11,838,670,238 7,387,711,652 4,450,958,586.38 60%
IPI reimbursement 7,688,006,310 7,247,946,279 440,060,031.17 6%
Social Security 7,066,097,556 4,654,182,403 2,411,915,153.42 52%
Financial Credit - IT and Padis 2,616,659,323 - 2,616,659,323 -
IRRF Interest on Equity 1,975,904,358 2,541,014,469 -565,110,111.07 -22%
Reintegra 500,864,099 1,365,115,190 -864,251,090.41 -63%
Cooperative IRRF 158,270,252 145,879,396 12,390,856.10 8%
DI Cancellation or Rectification 11,564,883 40,776,199 -29,211,315.95 -72%
Total 167,683,254,121 106,316,786,783 61,366,467,337.99 58%

Source: DW PERCOMP - Reference Dec-31-2020

  • Credits from lawsuits are responsible for 38% of the total credits used to offset accumulated in 2020.
  • Source: Federal Revenue os Brazil

    This reveals that, in the midst of a turbulent year, with the economy severely affected by the pandemic, many businesses saw an opportunity to generate cash flow.


    Check out the advantages of this practice:



    Tax credit recovery: which companies can benefit?

    Public and private companies of all sizes and adopting any tax systems (actual income, presumed income, and Simples Nacional) can be benefit from the recovery procedures.


    How could I identify that my company has values to recover?


    In a very simplified way, we can be said that the recoverable amounts can be verified according to its Accounting Bookkeeping analysis, other statements, offset and paid amounts through Darf.


    It is worth mentioning, however, that the ideal is that a tax review precedes a credit recovery application. An accurate technical analysis will lead to the correct identification of the credits, making the necessary qualification and quantification.

    Through this diagnosis, a mapping of the company's tax behavior in the last five years, a period in which it is still possible to apply for retroactive credit recovery, is made.


    How to apply for credit recovery?


    In most cases, credit recovery must be applied through the PER/DCOMP Web program, an environment that allows taxpayers to apply for return, offset, refund, and reimbursement within the Federal Revenue.

    In this application, detailing the IPI refund credit is not yet possible. In this case, the taxpayer must use the PER/DCOMP program.

    In some situations, it is necessary to formalize an administrative process using written forms, such as for the recovery of Withheld Pis/Cofins credits.


    What is the difference between credits offsetting, return, and reimbursement?

    •  Offseting: the company states overpayments and indicates how it wishes to use the amount to offset payable taxes, using the amount corresponding to the identified credit.
    • Return: the company informs which amounts were overpaid and apply for a return. Upon confirmation, the amount is transferred to the bank account.
    • Reimbursement: it is applicable to the applications related to PIS/Pasep, Cofins and IPI.


    In order to determine which is most appropriate, it is necessary to assess the company's tax profile, taxes, contributions, and volumes involved. Generally speaking, businesses with large operations and a significant amount of credits choose to refund the amounts.

    When the refund is chosen, there is no impediment to lately request the Federal Revenue Service to allocate the credits to be recovered to offset debts.

    After the administrative process is completed, the amounts offset, refunded, or reimbursed are updated with interest based on the Selic rate.


    Do the tax credits expire?


    The taxpayer loses the right to recover credit after five years, counting from the date on which the credit was actually recorded.


    Cross-offseting of credits: a path to be explored

    Cross-offsetting is a more recent opportunity, available to taxpayers already included in eSocial and, therefore, valid as of the period after the company joined this system. In other words, in this case, offsetting is only possible if the company was already included in the eSocial.

    This modality allows federal tax credits subject to return, reimbursement and offset to be used to offset social security contributions.

    The advantage is that this kind of procedure is faster in authorizing credits to be offset, when compared to the application process through the Federal Revenue. Another point is that companies taxed by the Actual Profit are also able, through this new way, to offset prepayments of IRPJ and CSLL.


    Tax intelligence to support your business growth


    Taking advantage of credit recovery opportunities requires the support of a tax team specialized in this task. Consultatively and strategically, the team at Domingues e Pinho Contadores offers specific or continuous assistance to your business, from the identification of opportunities to the necessary administrative procedures.



    Author: Cristiano Gonçalves, partner and manager of the Accessory Obligations Department at Domingues e Pinho Contadores.



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