Compensation and restitution of federal taxes: crisis scenario expands search for tax opportunities

Cristiano Gonçalves

Covid-19 has already had an impact on the Brazilian economic scenario, which has been responded to by fiscal and labor measures issued by the government to help tackle the crisis. At this time, it is also expected that the movement to seek tax opportunities by companies will gain strength.

Although compensation and restitution of federal taxes are already available options, the moment of crisis will certainly increase the interest on the subject, turning the taxpayers' eyes to the possibility of obtaining these benefits.

When identifying values of taxes or contributions that can be compensated, whether due to improper or greater collection, the company can request refunds, reimbursement, compensation or reimbursement through an administrative process with the Federal Revenue, via PER / DCOMP Web system.

The recovery of values represents relief for cash. Therefore, investing in the verification of these opportunities is a relevant item within the current business financial planning.

Offset of taxes or contributions

Tax credits from PIS, Cofins and IPI, negative balances from IRPJ and CSLL or amounts withheld at source as a contribution to PIS / Pasep and Cofins are among the cases in which recovery is possible.

The following are federal taxes and contributions that should be checked:

COFINS (Social Security Financing Contribution);

CSLL (Social Contribution on Net Income);

FGTS (Length of Service Guarantee Fund) - 10% fine for dismissals without cause;

INSS (National Social Security Institute) on severance pay - in cases of unfair dismissal

IOF (Tax on Financial Operations);

IPI (Tax on Industrialized Products);

IRPJ (Corporate Income Tax);

PIS (Social Integration Program).

Companies that have federal tax credits, with debts of the same or different nature, may request the offsetting of taxes or contributions. See examples below:

PIS & COFINS	compensate each other and other federal taxes
IRPJ & CSLL (companies under the presumed profit tax regime)	compensate each other and other federal taxes
IRPJ & CSLL (companies under the real profit tax regime)	compensate other federal taxes
IPI	compensate each other and other federal taxes
INSS	compensate each other and other federal taxes* *compensation with other federal taxes is possible based on the eSocial classification.

Cross-compensation between federal and social security taxes

Cross-compensation is an instrument that allows taxpayers who have federal tax credits subject to restitution, reimbursement and compensation to use them immediately to offset their social security contributions.

All companies that have already qualified for eSocial can benefit from cross-compensation. Normative Instruction No. 1810 of the Federal Revenue regulates the unification of tax compensation regimes to legal entities that use the system.

Through cross-compensation, companies that have social security credits, such as INSS, and tax credits, such as PIS, Cofins, IRPJ and CSLL, among others, are allowed to determine the social contributions due and offset debts subject to reimbursement or refund.

In a way, the taxpayer would have no cost to pay the tax due, as he would use the existing credits for that. As eSocial also opened the possibility of quick release of credits with compensation, there is also no need to wait months for the response to the request sent to the IRS.

Companies under the Real Profit tax regime, which are currently unable to offset their IRPJ and CSLL prepayments and have negative balance credits, can also, from cross-compensation, obtain greater financial strength.

It is worth mentioning that only debits and credits related to the calculation period after the use of eSocial can be the object of this compensation. For the purposes of cross-compensation, the data sent by the company to the DCTFWeb system is used.

It is necessary that a plan be drawn up to promote a complete diagnosis, raising any contributions paid and duplicity based on reliable and consistent information to confirm the effective right to credits.

Deadline for requesting refunds

The deadline for requesting the refund of taxes is five years, with due correction calculated based on the Selic rate.

The role of tax review

The tax review fulfills the role of ensuring that the company remains regular with the authorities, while identifying the most advantageous legal practices for the business.

Using this solution is a way of reducing tax expenses, identifying opportunities and, consequently, contributing to a more competitive position.

Thus, it is necessary to promote a thorough analysis of the tax situation and all taxes paid, checking whether the tax obligations have been fulfilled and whether there is the possibility of refunding taxes.

The tax review usually confirms that companies are lost in the face of Brazilian tax complexity and fail to take adequate advantage of planned opportunities, including the possibility of cross-compensation, something that is still little explored by most businesses.

This diagnosis must be made periodically to better benefit from tax rules and to guide the company's actions in a scenario full of obligations and systems for transmitting information to the respective tax authorities.

The review can map, for example, the company's fiscal behavior in the last five years, a period in which it is still possible to request retroactive recovery of credits for the period.

Count on DPC to identify credit recovery opportunities

Domingues e Pinho Contadores is able to assist the taxpayer in identifying and requesting tax credits as quickly as the current crisis scenario has been demanding. The team of consultants remains attentive to the legislation, with mastery of tax tools and best market practices.

The company also offers the tax review service, a solution that promotes an even more complete diagnosis and guides the business positioning to both a short and long-term horizon, but also gives immediate answers about the adjustments that must be made to have a positive impact the health of the business.

See to: Tax credit recovery: a boost to emerge from the crisis