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Brazil: Tax refunds and interaction with social security liabilities

Brazil: Tax refunds, social security liabilities

Guidance published in June 2018 provides rules relating to tax refunds and the interaction with social security liabilities.

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The guidance was published as Instrução Normativa RFB nº 1.810 (13 June 2018), and it updates Normative Instruction RFB No. 1717 (17 July 2017). Among the updated measures, the new Normative Instruction introduces the ability to offset social security taxes with Brazilian federal taxes (i.e., taxes collected by the tax authority such as the corporate income tax (IRPJ) and certain social contribution on profits (CSLL and PIS, and COFINS)).

Taxpayers must meet certain conditions to participate in this offset program, such as:

  • The company must use the eSocial system (i.e., the digital bookkeeping tax, social security, and labor obligations tool as required by the Brazilian government in order to unify the delivery of employer and employee data to the government)—this is also the system used by entities under the “Lucro Real” methodology to inform them of their corporate tax liability (in general, companies with annual revenue exceeding BRL 78 million). 
  • Only credits related to tax periods after the adoption of the DCTF-WEB system (i.e., after September 2018) can be used. For credits prior to this date, taxpayers can request a refund (administratively or judicially). 

 

Read a June 2018 report (Portuguese) prepared by the KPMG member firm in Brazil

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