[free translation]
Complementary Law No. 160/17 has as main objective to regulate the procedure for the States and the Federal District to grant remission (forgiveness) of tax debts arising from exemptions, incentives and tax benefits established in disagreement with the Federal Constitution.
Notwithstanding the absolute relevance of the central theme of the Law - which in itself demands a specific analysis - draws attention to another legislated point.
As of 11/22/2017 (date of the enactment of the new text of LC 160/2017), the fiscal and fiscal-financial incentives and benefits granted by the States and the Federal District related to ICMS are now considered as investment grants.
That is, the Legislator defined the legal nature of these specific incentives, and there is no more room for the RFB to question whether said tax incentive is a subsidy for investment or for funding. Like the transformation of water into wine, subsidies (all) are investment grants!
The rule also applies to incentives established in disagreement with the Federal Constitution, provided that certain requirements set forth in the Law are met.
For some time, the Federal Revenue Service of Brazil had been assessing taxpayers because it understood that many tax incentives related to ICMS would qualify as costing / operating and, for this reason, subject to the IRPJ and CSLL profit). In practice, such an understanding reduces the incentive given by the federated entity by approximately 34%.
In the Judiciary and in the CARF, the issue is controversial, and the criteria for distinguishing between subsidies for funding and investment were defined by the doctrine and normative opinions of the RFB published in the 1970s.
Without going into the merits of the fiscal policy adopted (and how it is carried out), the new rule seeks to put an end to this discussion, since it equates any incentive or fiscal benefit to investment subsidies.
Therefore, the tax treatment for the determination of IRPJ and CSLL given to the tax or financial-fiscal incentives and benefits related to ICMS may, depending on the analysis of each specific case, be reviewed by the companies.
