STF suspends judgment on PIS/Cofins exemption on oil in the Manaus Free Trade Zone

The Estadão website reported that the Federal Supreme Court has suspended the judgment that discusses the issue surrounding the end of the exemption from PIS and Cofins on the import of oil and oil products by companies located in the Manaus Free Zone. Dr. Marcos Maia, partner at Maneira Advogados, was interviewed to talk about the topic.

STF suspends judgment on PIS/Cofins exemption on oil in the Manaus Free Trade Zone

Action was filed by the Instituto Combustível Legal, which alleges that decisions favorable to importing companies in the area cause an imbalance in competition

By Marcela Villar

09/28/2023

São Paulo – Minister Alexandre de Moraes, of the Supreme Federal Court (STF), asked to see the judgment that discusses the end of the exemption from PIS and Cofins on the import of oil and derivatives by companies in the Manaus Free Zone (ZFM), in the State of Amazonas. The action was on the agenda of this week's virtual plenary. With the suspension, the process must return to the agenda in 90 days.

The action affects companies that obtained injunctions and favorable decisions to be exempt from federal taxes when importing these products. According to the Instituto Combustível Legal (ICL), these court decisions cause a competitive imbalance in the sector and allow companies to sell fuel outside the ZFM, which causes a loss of R$1 billion to the public coffers. Imports even exceed the region's own demand.

The discussion in the Supreme Court is based on the validity of a 2021 law that amended a previous decree, from 1967, which regulated the Free Zone, a region with a series of benefits and tax incentives to attract investment in the region and boost regional development.

The Citizenship party claims that the 2021 law ended the tax exemption for these fuel operations, which would be unconstitutional. For the party, the 2021 law produces “devastating effects” for the oil industry installed in the region and opposes the constitutional objective of reducing regional inequalities.

Rapporteur's vote

The case's rapporteur, Minister Luís Roberto Barroso, however, denied the party's request. Before Moraes' request for a review, Barroso said that the 2021 law is valid because it did not violate or restrict the previous law. This is because the fuel, lubricants and oil sector was never on the list of beneficiaries of the Free Zone.

“The original wording of Decree-Law No. 288/1967 made it clear that its provisions do not apply to the import, export and taxation of lubricants and liquid and gaseous petroleum fuels”, stated the rapporteur minister in his vote.

According to him, the 2021 law only reinforced the 1967 decree in order to “neutralize possible tax asymmetry in fuel imports”. “There was, therefore, no change in the favorable fiscal conditions existing at the time of the promulgation of the Constitution or the revocation of fiscal benefits”, he added. Only the rapporteur has voted so far.

The Attorney General's Office (AGU), the Attorney General's Office (PGR), the Chamber of Deputies and the National Union of Fuel and Lubricant Distribution Companies (SINDICOM) also expressed their opinion in favor of the constitutionality of the 2021 law, in the same line as Barroso's vote.

According to the AGU, the most recent legislation “only formalizes the specific purpose of neutralizing tax asymmetry in fuel imports, eliminating competitive imbalances caused by court decisions obtained by fuel importers located in the Free Zone”.

Consequences

Lawyer Marcos Maia, partner at Maneira Advogados, states that if the majority of the STF follows the rapporteur's vote, companies that have these favorable decisions will have to return the amount not paid for taxes.

"If Barroso's vote is successful, the injunctions will, naturally, become invalid. The companies will have to pay all the taxes they failed to pay due to the injunction", says Maia. In the case of definitive decisions, companies may be protected, but it largely depends on the situation.

The companies obtained these precautions, according to him, under the allegation that the 1967 decree was not fully accepted by the 1988 Constitution. Therefore, they would be entitled to the tax benefits of the Free Zone.

Marcos Maia also says that Pis and Cofins on imports – the main federal taxes discussed in this action – have varying rates depending on the product. In the case of gasoline, the amount disbursed for PIS is R$ 141.1 per cubic meter and the Cofins amount is R$ 651.40 per cubic meter.

https://www.estadao.com.br/economia/sts-suspende-julgamento-isencao-pis-cofins-petroleo-zfm/