TRF-2 drops fines for use of internal goodwill

Report published in Valor Econômico showed that companies have managed to overturn tax assessments in court for using internal goodwill to reduce payment of federal taxes. Dr. Flávio Carvalho, partner at Maneira Advogados, was heard to speak on the matter.

TRF-2 drops assessments for use of internal goodwill

Decisions handed down by the 4th Panel, which benefit Gerdau and SulAmérica, took into account the “leading case” judged by the STJ

By Adriana Aguiar and Laura Ignacio — From São Paulo

04/12/2023

Companies are managing to overturn tax assessments in court for using internal goodwill to reduce the payment of federal taxes. Two recent decisions were handed down by the judges of the Federal Regional Court of the 2nd Region (TRF-2), based in Rio de Janeiro, and benefit Gerdau Aços Longos and SulAmérica Companhia de Seguro Saúde.

The two decisions, according to experts, show a trend in the Judiciary. In the trials, the judges took into consideration the “leading case” of the Superior Court of Justice (STJ) on the topic. In September, the 1st Panel dismissed the collection of Income Tax (IRPJ) and CSLL for improper use of goodwill resulting from the incorporation of Cremerpar by Cremer, which occurred in 2004 (REsp 2026473).

Internal goodwill is generated through operations between companies in the same group. It is an amount paid, in general, for the future profitability of the acquired or incorporated company. As Law No. 9,532 of 1997 allows it to be recorded as an expense on the balance sheet, the amount is amortized to reduce the calculation base (profit) of IRPJ and CSLL. It was only after the entry into force of Law No. 12,973, of 2014, that the amortization of internal goodwill was prohibited.

In April 2021, Gerdau had already managed to annul, in the TRF of the 4th Region, based in Porto Alegre, an infraction notice worth R$367 million, which dealt with internal goodwill. In 2016, this and other charges were maintained by the Administrative Council for Tax Appeals (Carf). The total sum of assessments for amortization of the group's internal goodwill reaches R$8.7 billion, according to this year's Reference Form.

In the TRF-2, Gerdau's discussion revolved around the corporate reorganization that generated goodwill amortized between March 2006 and June 2010. In the first instance, Gerdau obtained a favorable decision, now maintained by the 4th Panel of the TRF-2. The rapporteur, judge Luiz Antonio Soares, was defeated. He understood that the vehicle company was used to “manufacture million-dollar premiums”. For him, the operation had no business purpose.

The vote of judge Carmen Silvia Lima de Arruda prevailed. According to her, article 385 of the Income Tax Regulation (Decree nº 3,000) establishes that operations carried out by companies in the same economic group do not distort the goodwill.

Also according to the judge, “it cannot be assumed that the internal goodwill is artificial and illegal, and it is up to the Treasury to demonstrate that the corporate reorganization operations were atypical, artificial, and it is not enough to consider them as simulated based solely on the absence of an economic substrate and without the participation of independent parties, since there is no such restriction in the tax legislation applicable to the case” (case no. 0142536-69.2017.4.02.5101).

The SulAmérica case was also analyzed by the 4th Panel. But the decision was unanimous. According to lawyer Luiz Henrique Barros de Arruda, founding partner of Barros de Arruda Advogados and company representative in the process, the dispute involves more than R$100 million. “Today this discussion is the most valuable in Carf because it involves operations that were very common during the privatization period”, he states.

Arruda explains that, in this case, a foreigner, who participated as a minority shareholder in one of the group's companies, sold this investment to another company abroad. This new acquirer, however, decided to participate in the holding company. To this end, he contributed shares in the company under his control – which generated a premium – and exchanged them with the group's holding company, of which he became a minority shareholder. Consequently, the goodwill that the foreign company had incorporated began to be amortized by the company that incorporated it.

In the trial, the judges highlighted that, if the transaction was carried out before Law No. 12,973/2014, there would be no legal exception to the amortization of goodwill in accordance with Law No. 9,532/1997. In the case of SulAmérica, the amortization was carried out in 2005 and 2006 (process no. 5034985-37.2020.4.02.5101).

“It cannot be assumed that the internal goodwill is artificial and illegal”
— Carmen Arruda

“It is worth highlighting that in a recent decision, unanimously, the 1st Panel of the Honorable Superior Court of Justice took a position in the sense of recognizing the possibility of amortizing goodwill from the IRPJ and CSLL calculation basis, in accordance with the legislation in force at the time of the acquisition, that is, Law No. 9,532/97, in a case in which there is use of a ‘vehicle company’ and internal goodwill on the basis that there is no presumption regarding the artificiality of the goodwill”, states in her vote the rapporteur, judge Carmen Silvia Lima de Arruda.

For lawyer Luiz Henrique Barros de Arruda, what stands out most about the decision was the fact that the judges took into account the judgment of the 1st Panel of the STJ. “The Superior Court’s ruling is relevant because it rules out the common allegations made by the Tax Authorities that the amortization of internal goodwill or goodwill determined by vehicle companies cannot be deductible from IRPJ and CSLL”, he says. “From now on, the courts will begin to follow the same line as the STJ.”

Lawyer Diego Miguita, from VBSO Advogados, points out that, in the STJ judgment, the ministers highlighted that the Treasury did not prove that there was fraud or simulation. “The Federal Revenue Service, in general, bases tax assessments on the absence of a business purpose, but this is not a legal criterion.”

At the Administrative Council for Tax Appeals (Carf), decisions have been unfavorable to companies, largely due to the casting vote – a tie-breaking criterion in favor of the Tax Authority. “But, in court, the tendency is for this same guidance [from TRF-2] to be applied in other goodwill discussions”, he says.

According to lawyer Gilberto Alvarenga, partner at Alvarenga Advogados, the understanding of the TRF-2 is also important because the judges accepted the possibility of internal goodwill occurring, even though it does not involve a financial transaction, but a corporate transaction.

Two aspects, he adds, helped to validate the operations: the participation of a third party, a financial institution and a goodwill report, which at the time was not yet required by law.

According to tax specialist Flávio Eduardo Carvalho, partner at Maneira Advogados, the firm has similar cases and the understanding of the TRF-2 will be used in the arguments of these processes. “These decisions reinforce taxpayer defense on a topic that has always been controversial at Carf over the last ten years”, he states.

Through a note to Valor, the Attorney General's Office of the National Treasury (PGFN) informs that it will appeal the decisions of the TRF-2. It also highlights that the STJ's decision in REsp 2026473/SC cannot be considered a precedent, “since it was not issued under the repetitive system, and is still pending judgment on motions for clarification”.

https://valor.globo.com/legislacao/noticia/2023/12/04/trf-2-derruba-autuacoes-por-uso-de-agio-interno.ghtml