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Under Brazilian tax law, when taxpayers pay taxes declared unconstitutional by the Courts, the Government has a duty of reparation to return these amounts duly adjusted by the SELIC rate (interest and monetary correction). However, the Brazilian Revenue Service considers that the SELIC rate levied on the tax overdue to be recovered and the judicial deposits to be returned would be an equity increase on which Corporate Income Tax (“IRPJ”) and Social Contribution on Net Profit (“CSLL”) should be levied.

Now, the Brazilian Supreme Court has ruled that the SELIC rate accrued by the taxpayer is an indemnification and lends itself to recomposition of the taxpayer’s assets that paid the unconstitutional tax.

This discussion gains special relevance after the judgment of the thesis that determined the exclusion of ICMS (VAT tax) from the PIS and COFINS (social contributions) calculation basis, as the companies are calculating and recovering the credits arising from this topic, and the correspondent SELIC rate adjustment is a relevant portion of the amounts of these credits.